Results

• Below expectations: Glomac reported 9MFY04/15 PATAMI of RM57.4m came in below expectations, accounting for only 58.6% and 66.3% of ours and consensus’ estimates, respectively.

Deviations

• Lesser-than-expected property launches.

• Higher-than-expected effective tax rate.

Dividends

• Declared single-tier interim dividend of 2 sen/share (3QFY14: 2.25 sen/share). This represents dividend payout and yield of 61.9% and 2.0%, respectively.

Highlights

• 9MFY15’s revenue was largely contributed by Saujana Rawang, Sri Saujana, Suria Stoner and Glomac Cyberjaya. The 39.5% yoy decline in revenue was due to the absence of significant property launches and the group’s ongoing projects are almost fully sold.

• The decline in 9MFY15’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 RM86m as at 9MFY14 due to the deferment of planned launches to accommodate softer market conditions. Glomac’s will be having sizeable launches in 4QFY15 with total GDV of RM822m (Saujana KLIA, Phase 5 & 6 of Lakeside Residences, Centro V service apartments and shop offices and new phases at Saujana Rawang and Sri Saujana townships).

• Glomac’s unbilled sales stood at RM537m, representing only 0.81x of the group’s FY14 property development segment revenue.

• The group aims to match FY14’s sales of RM504m, largely from the turnaround sales momentum expected in 4QFY15, which mainly comprises of townships and landed residential products.

Risks

• Slowdown in sales
• Weaker margins.

Forecasts

• We tweaked our sales under property development segment on the back of lesser launches throughout FY15, as well as imputing higher effective tax rate for FY15. As such, FY15- 16 EPS is lowered by 15-18%. We also introduced FY17 forecasts.

Rating

HOLD

Positives

• Strong land-banking, branding and executiontrack record.

Negatives

• Lack of liquidity / free float

Valuation

Post-earnings revision, TP is lowered to RM1.04 (previously RM1.11) based on unchanged 40% discount to RNAV or implied FY15 P/E of 9.2x. Maintain HOLD on the stock.

Source: Hong Leong Investment Bank Research - 19 Mar 2015