INVESTMENT HIGHLIGHTS

• 1HFY17 earnings below expectation

• 1HFY17 earnings declined yoy

• Slow sales in 1QFY17 is expected

• Earnings estimate reduced

• Maintain NEUTRAL with lower Target Price of RM0.76

1HFY17 earnings below expectation. Glomac Berhad (GLOMAC) 1HFY17 Core Net Loss (CNL) of RM5.0m was below expectation against ours and consensus net profit expectation of RM67m and RM64m respectively for the full year of FY17. We believe that the negative deviation is caused by lower than expected recognition of property sales. As expected, no dividend is announced in the second quarter. We have excluded RM82m gain from Cheras land sale and RM28m gain from grant received for upgrade and improvement of infra surrounding Glomac Damansara development.

1HFY17 earnings declined yoy. Excluding the land disposal, revenue is lower by 29%yoy to RM189.8m as certain projects such as Glomac Centro and Reflection Residences have completed.

Slow sales in 1HFY17 is expected. 1HFY17’s sales of RM80m makes up 13% of management target of RM600m. Stronger sales is expected for the remaining of the year as the Company has planned to launch properties worth RM966m. Out of these, the biggest projects will be Plaza Kelana Jaya Phase 4 (GDV: RM363m) and Saujana Perdana (SU 4) (GDV: RM267m).

Earnings estimate reduced. FY17 earnings estimate has been reduced by 14% to RM57.5m to reflect the lower revenue recognition.

Maintain NEUTRAL with reduced Target Price of RM0.76. We have shifted the project revenue recognition period in our RNAV and hence the lower Target Price. Although we expect GLOMAC to register lower earnings in FY17 against FY16, the Company’s effort to lower down its gearing in current challenging environment is commendable

Source: MIDF Research - 1 Dec 2016