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Glomac (AmResearch) hold; fair value under review

Expanding presence in Puchong

• Glomac announced on Bursa Malaysia yesterday that it is acquiring a leasehold land in Puchong measuring approximately 200 acres for RM77mil or RM8.80psf. This land is basically an extension to its present development called Lakeside Residences.

• The development was a joint-venture with the vendor/landowner on a 90-acre piece of land where Phase 1 has been completed. However, given the disputes between both parties subsequent phases of the development had to be put on hold.

• Lakeside Residences is located behind Tesco hypermarket and near YTL Land & Development’s Lake Edge and Malton’s Mutiara Puchong developments. The development is accessible from the Damansara-Puchong, Kesas and Bukit Jalil highways.

• The development, first launched in 2005, comprises 537 units of double-storey terrace houses – priced between RM325k-RM550k per unit - and 100 units of semi-detached houses with total GDV of RM250mil to be done over five phases.

• We are positive about this acquisition mainly because it would be NAV and earnings accretive. Glomac will now be able to take full control of the 90acres of land under the earlier JV agreement and increase its landbank within the same location to 200acres.

• We estimate this development would have about RM1bil in GDV, assuming 80% efficiency ratio and the terrace units sold at an average of RM500k each, which could potentially boost our NAV by 25%.

• Going forward, Glomac’s earnings would be driven by strong unbilled sales of about RM600mil and will be launching over RM1bil of new projects starting with serviced apartments in Glomac Damansara priced at RM600-RM650psf.

• We reaffirm our HOLD rating with our fair value currently under review pending a meeting with the management.
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