Glomac building warchest for landbanking

Glomac Bhd (Dec 5, 86 sen)
Maintain hold with revised target price of 88 sen from 73 sen: Glomac's RM35 million 1HFY12 core net profit accounted for 45% of our and consensus full-year estimates. With close to RM50 million (8.6 sen per share) net cash, Glomac is in a good position for accretive landbanking opportunities.

We raise FY13/FY14 earnings forecasts by 4% and revalued net asset value (RNAV) by two sen. We now value Glomac at 88 sen on a lower 40% discount (previously 50%). The formalisation of Bank Negara Malaysia's prudent lending guidelines should remove surrounding policy risk.

Excluding RM6.5 million net gains from the 49%-owned Thai warehouse disposal, Glomac's 1HFY12 net profit rose by 12% year-on-year (y-o-y). The y-o-y growth in net profit was due to lower minority interest as its 51%-owned Glomac Tower was completed and handed over in November 2011.

Glomac has locked in RM212 million sales in 1HFY12 (Glomac Damansara: 41%; Glomac Rawang: 30%), meeting 42% of its RM500 million target for 2012. We expect sales to pick up in 2H with the launch of RM770 million new projects including: (i) RM370 million BU Centro @ Bandar Utama (phase 1; service apartments at RM560 per sq ft (psf) average selling price and shop offices at RM2.1 million per unit ASP); and (ii) RM270 million Reflection Residences @ Mutiara Damansara (RM750psf ASP).

Post completion of its Thai warehouse sale, Glomac's net cash position has further improved to RM50 million (or 8.6 sen per share) as at October 2011, from RM13.5 million (2.3 sen per share) as at end-1QFY12. With a stronger war chest, Glomac is looking to expand its landbank aggressively.

It is eyeing both big parcel tracts (more than 161.8ha for township development) and smaller sizes for pocket developments in the Klang Valley.

We raise our FY13/FY14 forecasts by 4% to factor in higher gross development values for Reflection Residences (to RM270 million, from RM250 million) and BU Centro (to RM520 million, from RM400 million) as guided by management.

Management aims to distribute at least 4.75 sen this financial year-end, translating into a 5.8% yield (compared with our 6.5% yield based on 30% payout ratio). — Maybank IB Research, Dec 5