Glomac’s 9MFY15 results came in below expectations at less than 50% of our/consensus full-year estimates. Maintain SELL and MYR0.88 (14% downside) amid the weak market environment. Earnings continue to be impacted by  delays in new launches and  the soft property market. We believe management’s FY15 new sales target of MYR504m is ambitious, given the prevailing negative sentiment on the property market.  

Below expectations. Glomac’s 3QFY15 (Apr) net profit of MYR4.6m (-64.9%  QoQ,  -79.7%  YoY)  brought  9MFY15  net  profit  to  MYR38.6m  (-45.6%  YoY).  This  came in  at  only  45%/44%  of  our/consensus  full-year estimates. Earnings continued to be hit by the lack of new launches over the past 12 months as well as higher opex for this quarter due to  higher staff expenses incurred. Glomac recognised a MYR30.2m fair value gain this quarter from the reclassification of Glo Damansara as an investment property. The company announced an interim DPS of 2 sen this quarter.

More  delays  in  launches.  New  sales  performance  continued  to  be lacklustre  at  only  MYR86m  for  9MFY15  (vs  MYR62m  in  1HFY15)  as most  of  its  new  launches  were  delayed  to  4QFY15,  during  which management  is  targeting  to  launch  about  MYR600m  worth  of  new projects.  Launches  were  minimal  in  3QFY15,  and  included  Phase  5  of Lakeside  Residences  (GDV:  MYR74m)  and  the  maiden  phase  of Saujana KLIA (GDV: MYR122m). Take-ups for these projects have been rather decent at 90% and 100% respectively. Management is still guiding for FY15’s total new sales  to at least match FY14’s total of MYR504m, although  we  think  this  is  rather  bullish,  given  the  current  soft  property market. Unbilled sales declined to MYR537m in 3QFY15 (vs MYR581m in 2QFY15).  

Forecasts. We slash  our FY15-17 earnings forecasts by 4-27% in light of the slower property take-ups expected going forward.  

Maintain  SELL.  Due  to  the  challenging  outlook  for  2015,  we  maintain our SELL call on Glomac. Our TP is maintained at MYR0.88, based on an  unchanged  55%  discount  to  RNAV.  Given  the  prevailing  negative sentiment on the property market, we believe the stock may continue to underperform over the immediate term. The upside risks to our view are: i) better-than-expected new sales numbers, and ii) an earlier recovery in buyer/investor sentiment.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

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

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Source: RHB