Review

• Glomac’s 9MFY24 net profit of RM8.4mn came in below expectations, accounting for 54% and 52% of our and consensus full-year forecasts, respectively. The underperformance was mainly due to lower-thanexpected development margins. Note that 9MFY24 revenue was within expectations and came in at 77% of our full-year forecasts.

• YoY, 9MFY24 net profit tumbled by 52% to RM8.4mn. This decline was caused mainly by a 39% increase in finance costs and a decrease in EBIT margin from 18.8% to 12.7% compared to the previous year. We recognise that the higher cost of construction and the less favourable product mix, which was heavily weighted towards affordable housing projects, were major contributing factors to the sharp decline in EBIT margin.

• Sequentially, 3QFY24 net profit improved to RM3.8mn from RM0.1mn recorded in 2QFY24, largely due to acceleration in progress billing recognition for tail-end projects, namely Plaza Kelana Jaya and 121 Residences.

• Glomac’s 9MFY24 new property sales decreased 7.8% YoY to RM142mn. The key sales contributor for the period under review was the new commercial products at Lakeside Boulevard II, Puchong. The group’s latest unbilled sales stood at RM347mn (1.1x FY23 property revenue).

• The group’s balance sheet is healthy, with its latest net gearing improving further to 0.08x from 0.10x a quarter ago.

Impact

• Maintain earnings forecasts pending a meeting with management later.

Outlook

• Management anticipates stronger sales in the fourth quarter, supported by the recent soft launch of Allamanda terrace houses at Saujana KLIA and Keys semi-Ds at Lakeside Residences, with a total estimated GDV of RM269mn. Allamanda has already achieved a take-up rate of 43%, while Keys has seen a take-up rate of 30%.

• Management remains cautiously optimistic about the group’s long-term prospects, backed by a solid balance sheet and a robust pipeline of development projects with a potential GDV of RM7.0bn.

Valuation

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

Source: TA Research - 27 Mar 2024