Review

• Glomac’s 1QFY24 net profit of RM4.1mn came in below expectations, accounting for 11% of both ours and consensus’ full-year forecasts respectively. The negative variance was mainly due to lower-than-expected progress billings and property development margins.

• 1QFY24 net profit experienced a YoY decline of 21.5% to RM4.1mn. This decrease was primarily attributed to a reduction in revenue by 8.2%, a decline in EBIT margin from 16.1% to 15.9% compared to the previous year, and an increase in finance costs by 25%.

• Sequentially, 1QFY24 net profit saw a significant decline of 70.8% compared to the immediate preceding quarter. This decline was predominantly a result of the completion of certain development projects in the previous reporting period.

• Despite the earnings missed, Glomac achieved a significant boost in new property sales during 1QFY24, with a YoY increase of 94% amounting to RM101mn. The outstanding sales performance can be attributed to robust sales of new commercial products at Lakeside Boulevard II, Puchong. The group’s latest unbilled sales stood at RM497mn, providing earnings visibility over the next 12 to 18 months.

• The group’s balance sheet is healthy, with its latest net gearing improving further to 0.12x from 0.16x a quarter ago.

Impact

• Maintain earnings forecasts pending a meeting with management later.

Outlook

• With 1Q sales already accounting for 25% of the FY24 sales target, Glomac appears on course to meet its RM400mn sales target. Future sales are anticipated to be bolstered by upcoming projects valued at approximately RM691mn.

• Management remains cautiously optimistic about the group's long-term prospects, backed by a solid balance sheet (with a net gearing of 0.12x and a cash balance of RM305mn) and a robust pipeline of development projects with a potential GDV of RM7.5bn.

Valuation

• We place our target price and recommendation under review pending more updates from a meeting with management.

Source: TA Research - 29 Sept 2023