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Glomac, Axis REIT make it into 50 Jewels list

KUALA LUMPUR: Glomac Bhd and Axis REIT made their debut on the Top 50 Malaysian Small Cap Companies (50 Jewels) 2010 list by OSK Research, with the property developer claiming a Top 10 standing, the research house said on May 6. Plenitude Bhd and Hektar REIT, meanwhile, are retained in this year’s list.

The research house said Glomac’s high unbilled sales of RM554.7 million (equivalent to 1.5 times its FY2009 total turnover) underpin its near-term earnings growth. These comprise primarily of projects in Glomac Damansara, Glomac Tower, Glomac Galleria and Glomac Cyberjaya.

Glomac has RM576 million worth of projects still to be launched in Glomac Damansara. These comprise a 15-storey office block with an estimated gross development value (GDV) of RM70 million (to be marketed en bloc), serviced apartments as well as boutique retail and office suites. These may be launched from May 2010 (FY2011) onwards. Also waiting to be launched are developments in the townships of Bandar Saujana Utama, Suria Residen, Saujana Rawang and Sri Saujana with a combined worth of RM14 billion. OSK Research said these townships will continue to grow organically and provide a stable stream of cash flow over the years.

Plenitude, meanwhile, has enjoyed a take-up rate of 90% and above for all its launches in Taman Desa Tebrau in Johor and Taman Putra Prima in Puchong, Selangor Upcoming malls and a monorail system in Taman Desa Tebrau could boost the growth of the township, the research house said.

On the REIT front, OSK Research said Hektar’s business model such as focusing on shopping centres, consumer-driven and diversified tenants as well as indirect partnerships ensures that its earnings will remain relatively resilient.

“Given its relatively defensive earnings [to the downside], the potential to rise on any significant and sustainable recovery in the retail sector, coupled with its attractive dividend yield of 8.9%, we continue to advocate a BUY on Hektar,” the research house added.

As for Axis REIT, OSK Research said it has a proactive management that seeks to enhance earnings growth and will carry out more acquisitions in the near future. Axis is also looking at organic growth to enhance its properties.

Downside risks facing Axis REIT like rising competition in the Petaling Jaya office space and uncertainty over the global economic recovery were largely mitigated by competitive rentals, well-distributed tenancy expiry dates and the diversification into other sub-segments, the research house said.

This year, OSK Research recommended 19 new companies from a cross-section of industries and sectors for the list. Meanwhile, two new categories -- financial services and conglomerate -- were added.

OSK Research raised the market capitalisation threshold for qualification to the list from RM1 billion to RM1.5 billion to maintain the breadth of coverage and ensure that better small-cap companies are represented.

The 50 companies are selected based on a scorecard consisting of quantitative and qualitative parameters. They are first screened according to their profit track record, price-earnings ratio (PER), price to net tangible asset (P/NTA), net gearing, return on equity (ROE), compounded annual growth rate (CAGR) in earnings, dividend outlook and management track record.

These companies are then ranked based on the parameters of lowest FY2010 PER, lowest FY2010 price/book value (P/BV), highest FY2010 dividend yield, highest FY2010 ROE, highest three-year earnings per share (EPS) CAGR, lowest price/earnings growth (PEG) and lowest relative sector PER.

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