Results

• FY16 core PATAMI increased 8% YoY (excluding RM22m provision on LAD), accounting for 110% of ours and consensus estimates, respectively.

Dividends

• Declared interim 2 sen per share bringing full year DPS to 4 sen, representing 5.3% dividend yield.

Highlights

• FY16 revenue grew 27% YoY mainly due to progress of revenue recognition from existing projects (Lakeside Residences, Glomac Centro and Reflection Residences) and maiden contribution from Saujana KLIA. Reflection Residences is near completion and is expected to handover in 3QCY16.

• Glomac has held back launches with only two projects launched (Saujana KLIA and Saujana Aman) in FY16 with GDV of RM274m versus initial target of RM630m against a backdrop of challenging market. With the reduced launches, new sales in FY16 only achieved RM304m (excluding one off disposal of Suria Residence, Cheras for RM146m), falling short of company’s target of RM500m.

• Going into FY17, Glomac is targeting to launch RM1.2bn new projects, circa 4.4x of FY16’s launches with sales target of RM600-700m (doubling from FY16). However, we are cautious on the launch of Centro V (GDV:RM240m) given its high price range of ~RM800 psf in the current soft market and do not rule out the possibility of launching delay. Reflecting our cautious stance, we only assume RM1bn launches with lower sales target of RM560m (versus our previous target of RM600m)

• Given the success of Bandar Saujana Utama, Glomac will debut launch of landed residential in Saujana Utama 4 & 5 in 2QFY17 with total GDV of RM291m with indicative starting price of RM430k onwards. Another key new project is Plaza Kelana Jaya, Phase 4 with GDV of RM344m, consisting of 390 serviced apartments and 28 three & five storey shop offices. Given its strategic location in established township, the project is expected to receive well response from buyers. Unbilled sales decreased slightly from RM593m to RM652m QoQ, representing 1.1x of the group’s FY16 revenue from property development.

Risks

• Slowdown in sales

• Weaker margins.

Forecasts

• FY16 and FY17 earnings forecasts are reduced by 10% and 22% after we incorporate lower sales target.

Rating

HOLD

• Positives: Strong land-banking, branding and execution track record.

• Negatives: Lack of liquidity / free float

Valuation

Maintain HOLD with TP lowered from RM0.89 to RM0.80 based on 55% discount to RNAV, which is the -1 std of P/RNAV band (previously is 50% discount at average P/RNAV band), inline with sector P/RNAV.

Source: Hong Leong Investment Bank Research - 16 Jun 2016