Glomac seeks to maintain performance despite rising costs

KUALA LUMPUR: Glomac Bhd seeks to maintain its profit margins and sales for the year ending April 30, 2014 despite rising costs, said group managing director and CEO Datuk Fateh Iskandar Mohamed Mansor.

Iskandar said property developers are getting margins ranging from the teens up to 20%. However, he said, this is still lower than the 30% margin enjoyed by the group 25 years ago.

He said Glomac’s target sales is RM800 million for FY14, which is similar to what it achieved in the last financial year at RM802 million.

Iskandar said developers are experiencing pressured margins in several areas including increasing conversion premiums and material and labour costs.

“We hope to maintain our performance this year (FY14), if not better”, he told reporters after Glomac’s AGM and EGM.

“The reason our profitability has increased over the past few years was because we’ve increased the quantity of properties developed and sold,” he said.

Nonetheless, he added that the sales outlook and expectations for the group very much depends on the Budget 2014 announcement today. This is because any development that has an impact on purchasers and banks that provide end-financing will affect Glomac’s sales.

Iskandar said given that 30% of total loans given out by banks last year went to the property sector, the government should consider “consistent” policies, as “a policy too drastic will impact the property market and the economy as a whole”.

Iskandar is optimistic on the property market, particularly in Greater KL, which Glomac is focusing on.

“I think the property market is not heading into any sort of bubble at all,” he said.

Glomac will continue to focus its resources on Greater KL as 67% of the RM107 billion in residential sales for Malaysia last year was from within the area.

(From left) Iskandar, Tan Sri FD Mansor, group executive chairman of Glomac Bhd, and Datuk Richard Fong, group executive vice-chairman, posing to press after company AGM and EGM yesterday.

Iskandar estimated that Greater KL will see an increase of four million in population to 10 million by 2020, and that one million houses alone will be needed by then. “Say, with four people in one household, you will need one million homes.”  

Glomac seeks to take a slice of 10% to 15% of the projected one million homes.

Sales of residential units are forecast to make up 70% to 75% of group sales for the next two years, according to Glomac’s FY13 annual report.

Iskandar said the group “is not resting on its laurels”,  and with a healthy net gearing of 0.19 times as at July 31, can gear up further to the industry’s norm of 0.5 times.

Glomac has cash and bank balances of RM231.6 million as at July 31.

“We are very actively pursuing prospective landbank, and looking at what we think can give us attractive returns,” Iskandar said. He also does not rule out venturing into Iskandar Malaysia and Kota Kinabalu.

Glomac has 12 ongoing projects with a future gross development value of RM7 billion that will last for the next six to seven years, Iskandar noted. Its unbilled sales of RM852 million as at July 31 hovered around its all-time high of RM888 million in FY13.

Glomac is planning to launch RM1.38 billion worth of new projects in FY14, which include Saujana Utama 4 and Saujana KLIA townships.

Iskandar said Glomac has been paying out dividends since “day one [of being listed)], ranging from three sen to 6.5 sen per share over the last five years, with yields of between 5.3% and 8.1%.

For 1QFY14, the group reported a 14.8% increase in its net profit to RM24.13 million on revenue of RM162.27 million, against a net profit of RM20.996 million and revenue of RM161.07 million in the previous corresponding quarter.

This article first appeared in The Edge Financial Daily, on October 25, 2013.


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