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Glomac Bhd (Inter-Pacific Research) outperform; target price RM2.14

Above expectation

Highlights:


• Outperform: We raised our target price to RM2.14 based on EPS of 21.4sen and ascribed P/E ratio of 10X. Glomac re-iterated their intention to match FY10 dividend payout of 8.5sen or possibly more attractive payout. We like Glomac due to (1) unbilled sales of RM572mn; (2) positive response to their launches in FY11; and (3) balance GDV of RM2240mn for launching beyond FY11.Pipeline project in FY12 include Glomac Al Batha Mutiara which is a 35-storey apartment with estimated GDV of RM250m as well as Glomac Utama mixed development with estimated GDV of RM400m. Both projects located at prime location of Petaling Jaya.

• Above expectation: YTD 2QFY11 top line made 67% of our full year forecast and XX% of consensus. Top line surged by 98.5% y/y against 1HFY10 mainly attributable to strong contribution of their ongoing project such as Glomac Tower, Glomac Damansara, Glomac Cyberjaya, Bandar Saujana Utama and Seri Bangi. In view of the improvement of quarterly results underpinned by swift progress of the ongoing projects we had raised our forecast for FY11-FY13 by 18%-20% with slight adjustment to margin as well.

• PBT surged: PBT surged for YTD 2QFY11 in tandem with strong revenue, but its margin declined by 5.6% y/y due to RM4.9mn fair value adjustment on investment properties in FY10. By adjusting for the RM4.9mn fair value gain, PBT margin gain by 6.8% y/y.

• Sales slowdown in 2QFY11: Glomac sales taper off in 2QFY11 barring significant launches with sales of RM65mn as compared to RM80mn in 1QFY11. As a results of declining sales, compared to 1QFY11 unbilled sales contracted by 12mn to RM572mn.

• Glomac Tower scheduled for completion in 1HCY11: The superstructure for Glomac Tower had reach 36 floors. Next 10% which will translate to billing of RM57mn is expected by end CY10, providing chunky contribution to revenue in FY11.

• Update on RM538mn worth projects scheduled for launching in FY11: (i) Glomac Damansara’s 2 block of service apartment worth RM250mn and retail mall worth RM145mn. The service apartment had garnered strong registrants with pricing of RM650psf. The pricing benchmark is closer to the high rise developments in Mutiara Damansara. (ii) Newer phases of Bandar Damansara. Saujana Utama Township worth RM85mn. To date RM52mn sales had been secured. (iii) 37% of RM61m launches of Saujana Rawang had been sold which translate into RM23mn sales.

• Catalysts are potential en-bloc deals: Potential en-bloc sales are Glomac Damansara’s 16 stories office block worth RM70mn, Glomac Cyberjaya 15 stories office tower with GDV of RM95mn and Plaza Kelana Jaya Phase 4 mixed commercial development with GDV of RM280mn.


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