Glomac’s 1HFY15 (Apr) results missed expectations at only 31%/33% of our/consensus full-year estimates. Earnings continued to be affected by delays  in  new  launches.  Maintain  NEUTRAL  with  a  lower  RNAV-based TP of MYR1.08 (2.9% upside), in light of a slower earnings recovery. We believe management’s  FY15  new  sales  target  of  MYR504m  is  a  tall order, as its new launches will likely be delayed into 1QCY15.   
 
Below  expectations.  Glomac’s  2QFY15  net  profit  of  MYR13.2m  (-45.6% YoY, -36.8% QoQ) brought 1HFY15 net profit to only 31%/33% of our/consensus full-year estimates. With limited new launches in 1HFY15, earnings for the quarter were mainly attributable to the progress billings from key projects such as Lakeside Residences and Saujana Rawang.  

Cautious stance going into 2HFY15. New sales performance has been lacklustre at only MYR62m for 1HFY15 (vs MYR30m in 1QFY15) due to the lack of new launches. Management continues to guide for MYR824m of  GDV  to  be  launched  in  2HFY15.  However,  the  project  launches  will likely  be  delayed  to  after  1  Jan,  as  management  awaits  the implementation  of  new  incentives  for  buyers  that  were  announced  in Budget  2015  (such  as  the  50%  discount  in  stamp  duty).  Among  the major projects to be rolled out are Glomac Centro V (GDV: MYR263m) and the first phase of Saujana KLIA (GDV: MYR122m). Management is confident that FY15 total new sales will at least match the FY14 total of MYR504m, but we think this is rather bullish given the expected delays. Management  is  also  targeting  FY15  dividend  payout  to  be  similar  to FY14’s 4.9 sen.  Unbilled  sales  remained  resilient  at  MYR581m  (vs MYR630m in 1QFY15).

Forecasts.  We  slash  our  FY15/FY16  net  profit  numbers  by  23%/16% given  the  expected  delays  in  new  project  launches.  We  also  introduce our FY17 numbers.

Maintain NEUTRAL. We  lower our RNAV-based TP to MYR1.08 (from MYR1.28), after ascribing a higher discount to RNAV of 45% (from 35%) in  light  of  the  expected  challenging  environment  ahead  and  slower earnings  recovery.  The  key  risks  include:  i)  further  delays  in  new launches,  ii)  weaker-than-expected  sales,  and  iii)  a  slower  recovery  in consumer sentiment.

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Company Profile

Glomac Bhd is a developer largely based in the Klang Valley. Its developments are largely concentrated in the Damansara area, but in the recent years, it has diversified into township developments which have received encouraging response from the market

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Source: RHB