Glomac’s  1QFY15  results  came  in  broadly  in  line  with  expectations.1QFY15 new sales were  lacklustre  given the absence of new launches. In light of weaker sales expectations going forward, we trim our FY15/16 earnings  estimates  by  4%/7%.  We  also  downgrade  Glomac  to NEUTRAL,  and  cut  our  FV  to  MYR1.28  (from  MYR1.38),  implying  an upside of 9.4%.  Earnings  could  see a pickup in 2HFY15, when its new projects (total GDV: MYR852m) are rolled out.

Broadly  in line.  Although Glomac’s 1QFY15  net profit of MYR20.8m (-13.6%  y-o-y,  -5.5%  q-o-q)  accounted  for  only  18%  of  our  full-year estimate, we deem   this to be in line as we expect earnings to come in stronger  in  subsequent  quarters.  Given  the  absence  of  new  launches, 1QFY15  earnings  were  thus  attributable  to  progress  billings  from  key projects  such  as  Lakeside  Residences  and  Saujana  Rawang.  Unbilled sales remained resilient at MYR630m (vs MYR714m in 4QFY14).

2HFY15 could see more excitement.  Management continues  to guide for  a MYR1.0bn GDV to be launched during FY15,  of which almost 80% (or MYR852m of GDV)  is  set to be launched in 2HFY15.  Glomac  maystart  launching  its  new  projects  aggressively  from  November  onwards (after the announcement of Budget 2015), as management expects more positive  market  sentiment  post-Budget  announcement.  Amongst  the major projects to be  rolled out  are Glomac Centro V (GDV: MYR263m) and  Plaza  Kelana  Jaya  Phase  4  (GDV:  MYR250m).  Over  50%  of  the FY15  launches  will  likely  be  landed  properties,  which  should  still  suitmarket  conditions.  New  sales  performance  has  been  lacklustre  at  only MYR30m for 1QFY15 (vs  MYR136m in 1QFY14) due to  the lack of new launches.  Although  management  expects  this  figure  to  improve  as  the new  projects  are  rolled  out,  we  believe  that  management’s  previous guidance of MYR800m new sales for FY15 could be too optimistic under present  market  conditions.  Given  that  it  still  has  about  MYR7bn remaining GDV beyond FY15, management has indicated that it is in no hurry to replenish its landbank.

Forecasts. We have trimmed our FY15/16 earnings estimates slightly by 4%/7% in light of weaker sales expectations going forward.

Downgrade to NEUTRAL.  While the sector peers have generally seen a sales recovery in 2QCY14, Glomac's sales were weaker than expected. As such, we raise our discount to RNAV to 35% (from 30%). We lower to NEUTRAL (from Buy) with a lower FV of MYR1.28.

Source: RHB