Maybank IB Research PP16832/01/2013 (031128)

Transcription

1 Maybank IB Research PP16832/01/2013 (031128) Company Update 15 March 2012 Buy (from Hold) Share price: Target price: RM0.855 Wong Wei Sum, CFA (603) Stock Information RM0.96 (from RM0.88) Description: Property developer with a spectrum of low-tohigh end products. Current ongoing projects include RM900m mixed development Damansara. Next key earnings catalysts include its c.200 acres prime-located Puchong land worth RM2b GDV. Ticker: GLMC MK Shares Issued (m): Market Cap (RM m): mth Avg Daily Turnover (USD m): 0.20 KLCI: 1, Free float (%): 34.8 Major Shareholders: % Bin Fateh D Mohamed 20.2 Loong Tuck Fong 17.6 Mohamed Man Fateh 14.3 Pacific Straits Hldg 6.6 Vasudevan Brahmal 6.2 Historical Chart Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Performance: 52-week High/Low RM1.01/RM0.665 GLMC MK Equity 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) (1.7) Relative (%) (0.2) (3.0) (4.0) (5.0) 3.9 A small but sexy all-rounder Upgrade to Buy. is on track to hit its RM500m sales target for FY12 with successes in the soft-launch of its Centro (40-70% booked) and Reflection Residences (90% booked) projects. The conversion of just half of these RM440m bookings into actual sales would boost its unbilled sales by 40%, lifting short-term earnings visibility. We raise our earnings forecasts by 2-6% and target price to RM0.96 (unchanged 40% discount to RNAV). The stock deserves a rerating trading at just 6x current year earnings and 0.8x book. New projects receive good responses. The Reflection Residences (RR) and Centro (GC) have been well-received by potential buyers. ASPs have been raised by 5-17% since the soft launch in Dec A 50% conversion of these bookings in FY12 (official launch by end-mar 12) would raise YTD sales to RM432m, closing in on its RM500m sales target for FY12, whilst unbilled sales could jump to RM775m (1.2x of our 2013 forecasts). Puchong, the goldmine. is completing the acquisition of 200 acres of leasehold land in Puchong; the project will be launched by end Part of the land will be developed into retail space and serviced apartments. Estimated GDV for this project is raised by 100% to RM2b (+12 sen to our RNAV), from RM1b. Given its prime location and excellent connectivity (new LRT station nearby), we expect the project to be well taken up. More land to come. s balance sheet would remain strong even after the acquisition of another 200 acres of land in Sungai Buloh. Its net cash position would reduce to 1.0sen/share, from 8.6sen/share as at Oct is eyeing pocket-sized land parcels in the Klang Valley with the potential for fast turnaround. We expect a 2-3sen RNAV enhancement for every new RM200m in GDV of its projects. Provides REIT-like dividend yield. Our net DPS forecasts are based on 30% dividend payout. These translate into a 4.9% CY12 yield vs. yields for large-cap retail REITs of %. We raise our earnings forecasts by 2-6% to factor in higher GDV for Puchong, and better take-up rates for GC and RR. is our top pick for the property sector. Bhd Summary Earnings Table Source: Maybank IB FYE Apr (RM m) Revenue 2010A A F F F EBITDA Recurring Net Profit Recurring Basic EPS EPS growth (%) NDPS (Sen) PER EV/EBITDA (x) Div Yield (%) P/BV(x) Net Gearing (%) Net cash Net cash ROE (%) ROA (%) Consensus Net Profit Earnings revision (%) SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

2 Closing in on RM500m sales target Strong response to new projects. The soft launches of s Reflection Residences (RR) (in Mutiara Damansara; RM270m GDV) and Centro (GC) (in Bandar Utama; RM520m GDV), both in Dec 2011, have seen booking rates of 40-90% (despite booking fees of RM20,000-30,000) in less than four months. This is a pleasant surprise to us given the challenging property market outlook. We attribute the success of these projects to the right products provided and their strategic locations, supported by excellent connectivity i.e. the proposed Sg Buloh-Kajang KVMRT project. Table 1: 's recent soft-launches Project Location GDV (RMm) Booking rates (%) Remarks Reflection Residences Mutiara Damansara RM270m (already in our forecasts) Centro Bandar Utama RM520m (already in our forecasts) Source: Company 90 Soft-launched in Dec To be officially launched by end-mar Selling price has been raised to RM850psf, from RM725psf (initial selling price) % - service apartments; 70% - shop offices The serviced apartment was softlaunched in Dec 2011 with 40-50% already booked. Selling price is likely to be raised to RM psf (from RM550psf). Meanwhile, is in the midst of signing SPAs for its retail units (RM120m GDV; 70% booked). RM500m sales target is attainable. Given the strong responses to GC and RR, has raised selling prices by about 5-17% since Dec A 50% conversion rate for these bookings (the project will be officially launched by end-mar 2012; there is a risk of full sales recognition given its financial year ending April) would result in new sales of RM220m, lifting YTD sales to RM432m. This will in turn result in meeting 86% of its RM500m FY12 sales target (90% of our RM478m sales forecasts). Table 2: is closing in its RM500m sales target for FY12 Sales Bookings* Conversion rate (%) ^ RMm As at Oct' Reflection Residences Centro retail service apartment Estimated sales (% of s FY12 sales target) 86 * Management guidance ^ Our assumptions. Sales to be recognized in FY12. RR and GC service apartments are expected to be officially launched by end-mar'12 Source: Company, Maybank-IB 15 March 2012 Page 2 of 9

3 Puchong, the next gold mine Puchong project to be launched by year-end. is completing the acquisition of 200 acres of leasehold land (c.150 acres undeveloped) in fast-growing Puchong. The land is close to Puchong s established commercial hub (where IOI Mall and Tesco Store are located) and the new LRT station under the proposed Ampang LRT line extension. The project is slated to be launched by end GDV is 2x higher now. We understand that will convert part of the land for mixed use development (terraces, semi-ds, condominiums and retail units), instead of pure landed properties as previously planned. The new land conversion (c.27 acres for retail units and condominiums) and higher selling prices have doubled the initial GDV estimate to RM2b (from RM1b). We expect a 12sen RNAV enhancement (due to the higher GDV) assuming an unchanged 30% pretax margin. The next earnings kicker. We continue to like the Puchong project and expect it to see strong demand given its strategic location supported by the new LRT station (which is expected to be operational by 2014). The Puchong project is expected to contribute from 2013 onwards (our forecasts: % of EBIT, %). Puchong is expected to be launched by end-2012 Source: Google map 15 March 2012 Page 3 of 9

4 Aggressive land acquisitions Another land acquisition in the near-term? Post the acquisition of land in Sungai Bulo, s net cash is expected to reduce to 1.0sen/share from 8.6sen/share as at Oct 2011, but its balance sheet remains strong. We understand that is also eyeing pocketsized land in the Klang Valley with the potential for fast turnaround and GDV of RM m. Every additional RM200m GDV of new projects raises our RNAV estimate by 2-3sen (assuming 20% pretax margins and a 3-year development period). Management does not discount the possibility of venturing into Iskandar Malaysia (IM) in view of increasing foreign demand for IM properties. Strengthening its foothold in Sungai Buloh. To recap, recently acquired two parcels of 99-year leasehold agricultural land measuring acres in Mukim Ijok, Kuala Selangor, for RM44m (RM5.06psf) via an auction land sale. The land is located next to its flagship Sungai Buloh township project, Bandar Saujana Utama (BSU). Attractive land deal. The price paid is cheaper than the RM14-20psf current asking prices of land around that area even after we include a land conversion premium of RM psf. The land will be developed into a mixed development. Total GDV is estimated at RM1b (assuming 85% efficiency, 12 units/acre, ASP of RM480,000/unit). To sustain long-term growth. Assuming a 18% PBT margin and 5- year development period, we estimate RM27m in net profits (or 3.7sen EPS) per year. Apart from EPS enhancement, the project will also provide sustainable earnings growth due to relatively resilient township sales (average monthly sales from BSU is about RM10m). Results preview 9MFY12 results to be in line. will release its 9MFY12 results in the third week of March. 2H performance tends to be better than 1H. We expect 3QFY12 core net profit to meet our expectations of around RM20m (+16% QoQ), lifting 9M net profit to around RM55m (+15% YoY), and meeting 68% of our full-year estimates. Property sales were RM212m as at Oct 2011 or 42% of its RM500m target for FY12, whilst unbilled sales were RM555m (0.9x our 2013 forecast). Earnings upgrade. We upgrade our earnings forecasts by +2-6% to factor in: 1) higher take-up rates for RR and GC and 2) higher GDV for the Puchong project to RM2b (from RM1b). Our RNAV estimate is raised to RM1.59 (+12sen) mostly due to higher GDV for the Puchong project. Note that we have factored in the 124m outstanding warrants into our forecasts (the warrant price of RM0.285 expiring in Oct 12, together with the RM0.55 conversion price totaling RM0.835 is at 2.3% discount to the mother price). 15 March 2012 Page 4 of 9 Attractive valuations. currently trades at: 1) 6.1x CY12 PER (vs. industry s 15x), 2) 19% discount to its NTA as at Oct 2011 and 3) 46% of our RNAV. Its attractiveness is enhanced by a REIT-like dividend yield of 4.9% (based on 30% payout assumption; 2011 actual payout of 33%). Management targets to pay at least 4.75sen in gross DPS (3.6sen net DPS or 4.2% net yield) in It has an unofficial dividend payout policy of 40%.

5 Table 3: FD RNAV estimates MV BV Surplus Landbank acres (RMm) (RMm) (RMm) Suria Residen, Cheras Suajana Utama, Sg buloh Plaza Kelana Jaya, Phase IV, PJ (4.5) Sri Saujana, Johor (30.8) Tmn Kota Laksamana, Melaka (2.6) New land in Mukim Ijok (next to Bandar Saujana Utama) Sub-total: 46.9 DCF (WACC: %) Damansara 99.3 Seri Bangi 1.6 Cyberjaya 16.0 Galeria Hartamas 5.5 Tower 11.3 Reflection Residences 14.7 Saujana Rawang 26.3 Centro 42.7 Cyberjaya Lake Residence extension, Puchong Sub-total: Investment properties NLA (sq.ft.) MV (RMm) BV (RMm) Surplus Kelana Business Centre 50, Plaza Kelana Jaya, Phase II 28, Sub-total: 0.9 Grand total: Shareholder fund (RMm) - FY Disposal gains -Thai warehouse 6.5 Total RNAV (RMm) (a) 1,086.6 Warrant conversion 2007/2012 (RMm); RM1.10 exercise price (b) 74.0 Adjusted RNAV (a) + (b) = c 1,160.6 Enlarged share base (post warrants) (d) FD RNAV/sh (RM) (c )/(d) 1.59 ^ has 100% equity but profit share agreements with landowner ranging between 1/3 to ½ of earnings Source: Company, Maybank-IB 15 March 2012 Page 5 of 9

6 1-year forward PER PE (X) sd: 10.5 Mean: sd: Apr-01 Sep-01 Mar-02 Aug-02 Jan-03 Jun-03 Nov-03 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 May-06 Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Source: Company 1-year forward P/NTA P / NTA (X) sd: 0.54 Mean: sd: 0.24 Apr-01 Sep-01 Mar-02 Aug-02 Jan-03 Jun-03 Nov-03 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 May-06 Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Source: Company 15 March 2012 Page 6 of 9

7 INCOME STATEMENT (RM m) BALANCE SHEET (RM m) FY Apr 2011A 2012F 2013F 2014F FY Apr 2011A 2012F 2013F 2014F Revenue Fixed Assets EBITDA Other LT Assets Depreciation & Amortisation Cash/ST Investments Operating Profit Other Current Assets , ,205.3 Associates Total Assets 1, , , ,147.7 Interest (Exp)/Inc (6.6) Exceptional Items ST Debt Pre-Tax Profit Other Current Liabilities Tax (36.0) (31.4) (37.1) (46.4) LT Debt Minority Interest Other LT Liabilities Net Profit Minority Interest Recurring Net Profit Shareholders' Equity Total Liabilities-Capital 1, , , ,147.7 Revenue Growth % 89.9 (11.1) EBITDA Growth (%) 82.2 (11.1) Share Capital (m) EBIT Growth (%) (10.5) Net Cash/(Debt) (126.0) (17.6) Net Profit Growth (%) Working Capital Recurring Net Profit Growth (%) Net Gearing % Net cash Net cash Tax Rate % (27.9) (25.0) (25.0) (25.0) CASH FLOW (RM m) RATES & RATIOS FY Apr 2011A 2012F 2013F 2014F FY Apr 2011A 2012F 2013F 2014F Profit before taxation EBITDA Margin % Depreciation Op. Profit Margin % Net interest receipts/(payments) Net Profit Margin % Working capital change (225.0) 53.7 (29.8) (35.3) ROE % Cash tax paid (37.4) (31.4) (37.1) (46.4) ROA % Others (incl'd exceptional items) Dividend Cover (x) Cash flow from operations (129.0) Interest Cover (x) Capex (1.7) (49.0) (5.0) (5.0) Asset Turnover (x) Disposal/(purchase) Asset/Debt (x) Others Net Gearing % Net cash Net cash Cash flow from investing 86.8 (18.2) (5.0) (5.0) Debt/ EBITDA (x) Debt raised/(repaid) Debt/ Market Cap (x) Equity raised/(repaid) EV/EBITDA (x) Dividends (paid) (18.6) (22.7) (27.6) (35.7) Interest payments Others Cash flow from financing 66.5 (22.7) 40.6 (35.7) Change in cash Source: Company, MaybankIB 15 March 2012 Page 7 of 9

8 APPENDIX 1 Definition of Ratings Maybank Investment Bank Research uses the following rating system: BUY Total return is expected to be above 15% in the next 12 months HOLD Total return is expected to be between -15% to 15% in the next 12 months SELL Total return is expected to be below -15% in the next 12 months Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax Disclaimer This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each security s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Berhad and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Berhad, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forwardlooking statements. Maybank Investment Bank Berhad expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. This report is prepared for the use of Maybank Investment Bank Berhad's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank Investment Bank Berhad and Maybank Investment Bank Berhad accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. 15 March 2012 Page 8 of 9

9 APPENDIX 1 Additional Disclaimer (for purpose of distribution in Singapore) This report has been produced as of the date hereof and the information herein maybe subject to change. Kim Eng Research Pte Ltd ("KERPL") in Singapore has no obligation to update such information for any recipient. Recipients of this report are to contact KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. As of 15 March 2012, KERPL does not have an interest in the said company/companies. Additional Disclaimer (for purpose of distribution in the United States) This research report prepared by Maybank Investment Bank Berhad is distributed in the United States ( US ) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Kim Eng Securities USA, a brokerdealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Kim Eng Securities USA in the US shall be borne by Kim Eng. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. This report is not directed at you if Kim Eng Securities is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Kim Eng Securities is permitted to provide research material concerning investments to you under relevant legislation and regulations. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply if the reader is receiving or accessing this report in or from other than Malaysia. As of 15 March 2012, Maybank Investment Bank Berhad and the covering analyst does not have any interest in in any companies recommended in this Market themes report. Analyst Certification: The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Additional Disclaimer (for purpose of distribution in the United Kingdom) This document is being distributed by Kim Eng Securities Limited, which is authorised and regulated by the Financial Services Authority and is for Informational Purposes only.this document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers. Published / Printed by Maybank Investment Bank Berhad (15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, Kuala Lumpur Tel: (603) ; Fax: (603) Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof Kuala Lumpur Tel: (603) ; Fax: (603) March 2012 Page 9 of 9