Results

• Below expectations: Glomac reported 1HFY15 PATAMI of RM34.0m came in below expectations, accounting for only 34.7% and 32.6% of ours and consensus’ estimates, respectively.

Deviations

• Lesser-than-expected property launches.

• Higher-than-expected effective tax rate.

Dividends

• None.

Highlights

• 1HFY15 revenue was largely contributed by Lakeside Residences, Saujana Rawang, Glomac Centro and Reflection Residences. The 39.4% yoy decline in revenue was due to the absence of significant property launches, completion of Glomac Damansara and tail-end projects in Bandar Saujana Utama.

• The decline in 1HFY15’s PBT was not as severe, thanks to costs savings from the completion of high-costs projects (Glomac Damansara) and ongoing high-margins developments (Lakeside Residences).

• Sales remain modest at RM62m as at 1HFY14 due to the deferment of planned launches to accommodate softer market conditions. Glomac’s launches will resume in 2HFY15 with potential GDV of at least RM602m.

• Another 3 phases of Lakeside Residences will be launched by Dec ’14 / Jan 15 with estimated GDV of RM193m. The development would consist of 2-stroey terrace houses.

• Glomac Centro’s Phase 1 currently have a take-up of 77% with non-Bumi units fully sold. Centro V (Phase 2) is scheduled to launch in Feb/Mar 15 (ASP of RM500k/unit and below) and is largely targeted towards parents with college-going children given that the project is surrounded by 7 colleges.

• Suria Residen (GDV: RM598m) expects to launch 25 link houses in 4QFY15, to be priced just below RM1m/unit. Phase 2 of Suria Residen is estimated to launch in FY16 (condominiums, town houses, super link houses and affordable homes).

• The group is confident that its sales momentum will pick up in 2HFY15 to match at least FY14’s total sales of RM504m with optimistic take-ups (70-80%) given that almost 70% of its launches would be landed developments.

Risks

• Slowdown in sales
• Weaker margins.

Forecasts

• Remained unchanged as we expect 2HFY15 to kick in stronger given launches will resume in 2H.

Rating

HOLD

Positives

• Strong land-banking, branding and executiontrack record.

Negatives

• Lack of liquidity / free float

Valuation

TP remained unchanged at RM1.11 based on unchanged 40% discount to RNAV or implied FY15 P/E of 8.3x. Maintain HOLD on the stock.

Source: Hong Leong Investment Bank Research - 4 Dec 2014