A record year for Glomac

Glomac Bhd (June 27, 85 sen)
Reiterate buy at upgraded target price of RM1.10:
Glomac’s FY12 ended April 30 core net profit of RM79.3 million (+26% y-o-y) was within our expectations but beat consensus forecasts by 6%. Its total 5.5 sen gross dividend per share (DPS) for FY12 was also in line.

We tweak our FY13/FY14 earnings forecasts by -2.9% to +2.6% post FY12 results, and introduce FY15 forecast. Our target price is raised to RM1.10 (+14 sen; unchanged 40% discount to realisable net asset value [RNAV]).

Glomac is deeply undervalued at just 0.8 times price-to-book value and 5.8 times FY13 price earnings ratio. Net profit for 4Q rose 48% y-o-y to RM22.2 million.

The underlying earnings strength was mainly due to robust progress billings and take-ups at Bandar Saujana Utama, Glomac Damansara and Glomac Cyberjaya, as well as a 3.6 percentage point improvement in earnings before interest and tax margins. Glomac declared a 2.75 sen final gross DPS, lifting total DPS for FY12 to 5.5 sen (4.9% net yield; 29% payout). Glomac chalked up record sales of RM663 million in FY12 (+59% y-o-y), while unbilled sales were at an all-time high of RM731 million (0.9 times our FY13 revenue forecast) as at end-April this year.

It targets to achieve RM869 million property sales in FY13 (+31% y-o-y), supported by RM1.1 billion in new launches (including en bloc sales of Glomac Damansara retail mall, Plaza Kelana Jaya Phase 4 [PKJ4]), against our FY13 sales forecast (excluding PKJ4 en bloc sale) of RM673 million. Given the strong demand for landed properties (especially houses priced between RM250,000 and RM750,000 per unit), Glomac is ramping up its township development projects.

It has recently proposed to acquire a 77.6ha plot of land in Sepang for RM66.8 million cash (or an effective cost of RM9 to RM10 per sq ft). The project, which has an estimated gross development value of RM800 million, is similar in concept to Bandar Saujana Utama (to be launched by FY14).

We fine-tune our FY13/FY14 earnings forecasts by -2.9% to +2.6% after tweaking some balance sheet items and incorporating the status of the latest projects as well as new projects in Sepang and Mukim Ijok into our numbers.

Our new RNAV estimate is RM1.82 (+13 sen), reflecting a lower weighted average cost of capital due to a change in assumed beta, the latest estimates of its remaining landbank and a change in selling price assumptions for its Mukim Ijok land. — Maybank IB Research, June 27

This article appeared in The Edge Financial Daily on June 28, 2012.

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