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OSK Research: Glomac - Buying back part of Suria Stonor

THE BUZZ

Glomac announced that it would be acquiring 18 units of condominiums in Suria Stonor from Dekad Darat SB and Progressive Berg SB for a total cash consideration of RM38.4m. (Bursa)

OUR TAKE

Suria Stonor. Suria Stonor is a 138-unit high-end condo development that sits on a piece of freehold land in KLCC. Launched, developed and recently completed by Glomac, the initial launching price was in the region of RM750-800psf in year 2005/06.

Who are the vendors? Other than the fact that they were not related to the directors and/or major shareholders of Glomac, little information was revealed about the vendors. We will need further clarification from the management. Nonetheless, we suspect that these vendors may have bought the units in bulk during the heydays of the 2007/08 and may have found it increasingly difficult to liquidate that many units of their investments at a favourable price. Given Glomac’s vast networking and marketing machinery, it would have therefore been more sensible for the vendors to sell the units back to the company instead.

A good trade. The announcement said the deal would be transacted at a hefty 35% discount to the last transacted market price of RM1,000psf. Therefore, assuming that Glomac resold the units in the open market for, say, RM900psf, this could translate into a gross gain of 20%, or a potential gross gain of 15.5 sen/share, which in turn translates into a potential realised net gain of 11.6 sen/share after tax (see Figure 1 for scenario simulation).

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Maintain Buy. We are leaving our earnings forecast unchanged for now, although we note that there could potentially be some revaluation surplus to be recognised from this investment. As such, we maintain our BUY call on Glomac, with a target price of RM1.84 for now, based on 0.9x CY11 P/NTA.

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