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? Buying back Suria Stonor. Glomac announced that it has entered into a Sale and Purchase Agreement (SPA) with Dekad Darat S/B and Progressive Berg S/B for the proposed acquisition of 18 units of Suria Stonor apartments. Total purchase consideration is RM38.4m, representing some 35% discount to the last transacted price of RM1,000 psf for comparable properties in the condominium.
? More details. To recap, Dekad Darat and Progressive Berg previously acquired some 30-40 condo units of Suria Stonor, which was completed two years ago by Glomac. Before this proposed acquisition by Glomac to buy back the 18 units, Glomac still left with 6-7 unsold units (about 90% take-up). Although the reason for the re-sale by Dekat Darat and Progressive Berg was not mentioned, we think it could be due to some financing constraints.
? No P&L impact. We are neutral on Glomac for this latest development. The 18 units will be put into the market again by Glomac and these condo units will be categorised as “Investment” in Balance Sheet upon the completion of the acquisition. Although this deal could show signs of lacking holding power of investors, this may not be reflective on the overall property market now as current interest rate is still relatively low. It, however, may signal the extent of speculative buying activities previously during the boom of high-rise residences especially within the KLCC area 2-3 years ago, leading to an oversupply now.
? Risks and concerns. The risks include: (1) regulatory risk; and (2) country risks.
? Forecasts. Unchanged.
? Maintain Outperform. No change in our RNAV estimate, and likewise our fair value of RM2.09, based on a 15% discount to RNAV of RM2.46/share. Maintain Outperform.
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