Glomac Berhad KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES. Recommend BUY Target Price (TP): RM1.46

Transcription

1 14 June 213 Initiating Coverage Glomac Berhad Landbanking strategy paying off INVESTMENT HIGHLIGHTS Landed township development to become core developments Robust sales of RM519m in 9MFY13 and unbilled sales of RM827m as at end 9MFY13 Healthy balance sheet Initiate coverage with a BUY recommendation and target price of RM1.46. Capturing strong demand for landed residential developments: Glomac Berhad s (Glomac) core developments are gradually shifting from mixed and high rise residential developments to landed residential and township projects. Out of the nine on-going developments, four are landed residential projects. Total outstanding gross development value (GDV) of the landed projects accounted for 83% of the RM4.5b worth of on-going developments. Moving forward, Glomac will be able to capture the strong demand for landed residential projects. Successful land banking strategy: Glomac had expanded their land bank aggressively for the past 2 financial years. They acquired 3 parcels of land in FY11 and FY12 which will be developed into landed residential developments with total GDV of RM4.5b. Among the new acquisitions is the current flagship development, Lakeside Residence which is located at the prime area of Puchong. Total GDV of Lakeside Residence is RM2.5b. Sales and unbilled sales on rising trend: Glomac registered property sales of RM519m as at end 9MFY13 (Jan), which translated into yearon-year sales growth of 51%. After taking into account robust sales of new launches like Lakeside Residence as well as strong sales momentum of ongoing projects, we believe Glomac is on-track to capture sales of about RM8m from RM1b worth of launches in FY13. Sufficient pipeline: Glomac has lined up 3 new projects for launching in FY14 with including: (I) (II) (III) Plaza Kelana Jaya Phase 4- Total GDV RM25m Saujana Utama Phase 4 in Rawang- Total GDV RM8m Dengkil township- Total GDV RM1.2b Healthy Fundamentals: Driven by strong sales growth, earnings grew at a compounded annual growth rate (CAGR) of 19.4% for the past 4 financial years. Balance sheet of Glomac is healthy with net gearing ratio of.19x as at end 9MFY13. Glomac has an internal target of.5x. Assuming gearing is raised to.5x, Glomac will be able to raise additional RM25m for land banking activities. RETURN STATS Recommend BUY Target Price (TP): RM1.46 Price (13 Jun 213) RM 1.22 Target Price RM 1.46 Expected Share Price Return 19.63% Expected Dividend Yield 4.12% Expected Total Return % STOCK INFO KLCI Bursa / Bloomberg Board / Sector Syariah Compliant 52/GLMC MK Main/Properties Yes Issued shares (mil) 78.6 Par Value (RM).5 Market cap. (RM m) Price over NA 1.11x 52-wk price Range RM.78 RM1.41 Beta (against KLCI) mth Avg Daily Vol 2.58m 3-mth Avg Daily Value Major Shareholders Tan Sri Dato Mohd Mansor Datuk Fong Loong Tuck RM2.81m 2.4% 16.85% Dato Fateh Iskandar 16.6% Decent dividend: Glomac has an unofficial dividend policy of 4% payout. They announced a 4.2 sen dividend in FY12 which translated to dividend yield of 3.2%. We have forecasted a dividend yield of 3.2% to 4.9% for FY13 to FY15. KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES

2 INVESTMENT STATISTICS FY Apr FY12 FY13F FY14F FY15F Revenue ,75.8 EBITDA Pretax Profit Net Profit (RM m) Net Profit Margin (%) EPS (sen) EPS Growth (%) PER Net DPS(sen) Dividend Yield (%) Source: Company, Forecasts by MIDFR Corporate history: Glomac commenced its operations in 1988, established by Tan Sri Dato' FD Mansor, Group Executive Chairman and Datuk Richard Fong, Group Executive Vice Chairman. The company is currently helmed by Dato' FD Iskandar, the son of Tan Sri Dato FD Mansor. The company was listed on 13 June 2. To-date, the Group has completed projects with total sales value of over RM4b. Glomac s first project was a mixed development, Taman Jasa Utama in Selayang. The turning point was the development of a few commercial projects in Kelana Jaya, Petaling Jaya which was an undeveloped area. Among the projects completed are 6-8 storey business centre like Glomac Business Centre, Kelana Business Centre and Kelana Centre Point. The Group's leading township, Saujana Utama located in Sungai Buloh also began in the 9 s. Other notable developments are the gated community of Aman Suria Damansara in Petaling Jaya, Suria Residence in Cheras, Glomac Tower (Grade A office sold en-bloc at RM1,12psf), and Suria Stonor, a luxury condominium in Kuala Lumpur City Centre (KLCC). Summary of 3QFY13 Location Type of Developments Total GDV (RM m) Remaining GDV (RM m) Unbilled sales (RM m) Glomac Damansara Jalan Damansara High Rise Mixed Development Glomac Cyberjaya Persiaran Apec, Cyberjaya Commercial Glomac Cyberjaya 2 Persiaran Apec, Cyberjaya Commercial Glomac Centro Reflection Mutiara Damansara Bandar Utama, Damansara Mutiara Damansara High Rise Mixed Development High Rise Residential Bandar Saujana Utama Sungai Buloh Township 1, Saujana Rawang Rawang Township 1, Sri Saujana Kota Tinggi, Johor Township Lakeside Residences Puchong Landed Residential 2,5 2, Others New projects Plaza Kelana Jaya, Phase 4 Kelana Jaya Commercial Saujana Utama 4 (SU Sg. Buloh) Sungai Buloh Township 8 8 Cyberjaya/Putrajaya Dengkil, Sepang Township 1,2 1,2 Total 1,521 6, Projects: Glomac currently has 9 major ongoing projects with total outstanding GDV of RM4.5b. Majority of the projects are located at Klang Valley except for Sri Saujana. Landed residential development accounted for 83% of the total outstanding GDV of on-going projects. Inclusive of new projects, total outstanding GDV of Glomac is RM6.8b which is a decent amount for a mid-cap developer. 2

3 3 Sales improving gradually: Glomac hit a record sales of RM916m in FY8 mainly due to the en-bloc sales of the RM57m Glomac Tower (now known as Menara Prestige). Excluding the en-bloc sales, FY8 sales was about RM339m. However, sales declined substantially to RM172m in FY9 due to more challenging business environment during the financial crisis. Sales had gradually recover from FY1 onwards. Glomac secured sales of RM633m in FY12 and we believe property sales could be about RM8m in FY13. Contribution from township developments had increased in tandem with the growing sales of the group. For the past 5 years, township developments contributed in average 45% to total sales. Moving forward, we believe landed residential will be the main contributor to sales. Historical sales and unbilled sales RM'm 1 9 Unbilled sales Sales (RM 'm) FY8 FY9 FY1 FY11 FY12 9MFY RM'm Sales from township developments FY9 FY1 FY11 FY12 9MFY13 Land banking strategies: In the past 2 financial years, land banking strategies of the group had geared towards landed township developments. Glomac acquired 3 parcels of land with total GDV of RM4.5b. These 3 projects will be the core developments for Glomac for the short to medium term. Moving forward, Klang Valley will still be the main focus area of the group to capitalized on the strong population growth of the Greater KL Conurbation. Ongoing projects Lakeside Residence: Lakeside Residence is the new flagship development of Glomac. Spanning over 2 acres, the leasehold land was acquired in FY11. Total GDV for the project is RM2.5b. The projects mainly comprises of double storey terrace houses (DSTH) as well as Semi-d, bungalow, shop offices and condominiums. I. Strategic Location: The project is located at a prime location in close proximity to Puchong s thriving commercial hub. Lakeside Residence is accessible via KESAS, LDP and Jln Puchong. Located at a short distance away from Tesco Puchong, the project will be served by 2 new LRT stations of Ampang LRT extension. The LRT stations are targeted for completion in 214. II. Strong take up: Phase 1 of the project, Rhapsody is a joint venture with the land owner for 12 units of DSTH. It was completed in 28. Glomac launched phase 2 to phase 4 in FY13, which worth RM242m. Phase 2 (15 units of DSTH with GDV RM75m) and 3 (139 units of DSTH with GDV of RM94m) was launched in September 212 and January 213 respectively. Take up rate was overwhelming as phase 2 was fully taken up at first day of launching while phase 3 is 9% taken up. Remaining units of phase 3 are Bumi Lots.

4 4 III. New phases: Phase 4 of Lakeside Residence, Avory had been launched and take up rate was also strong. Phase 4 comprises of 75 units of DSTH with total GDV of RM6m. Due to the step up of pricing, GDV for phase 4 was revised from RM54m to RM6m. Selling price for a DSTH in Lakeside Residence had increased from RM7K for phase 2 to RM8k for phase 4. Currently phase 5 of the project is opened for registration. Due to the lack of landed residential developments which are close to the city centre, we believe strong sales momentum will persist for Lakeside Residence. Glomac Damansara: Glomac Damansara is a mixed development with total GDV of RM95m. The project is strategically located at Jalan Damansara right behind the future MRT station of TTDI. I. Almost fully taken up: Phase 1 which comprises of 5 and 8-storey shop offices were fully taken up, completed and handed over in May 212. A 16- storey office block, named Menara Glomac was completed in June 212. The building was kept as Glomac s headquarters with a few floors available for rental. II. En-bloc sales: Glomac also sold en-bloc a 25-storey office tower to Lembaga Tabung Haji for RM171m. The office tower will be handed over in 213. The 2 residential towers comprises of 365 units of service apartments. Named Glomac Damansara Residences, total GDV of the project is RM285m. The project was launched in February 211 with selling price of RM65psf. Selling price had increased to about RM7-75psf. Take up rate is encouraging at 92%. III. Possibility of another en-bloc sales: Final phase for the project is a 35, sq ft boutique retail mall. Glomac is in negotiation with interested parties. We believe it could be sold en-bloc at about RM35m. Glomac Centro: Glomac Centro is a high rise mixed development which located at Damansara Utama. Total GDV is RM52m. Phase 1 was launched in April 212 comprises of 54 units of shop offices with GDV of RM117m as well as 344 units of service apartments with GDV of RM25m. Selling price for shop offices are around RM2m per unit while selling price for the serviced apartments are around RM5-55psf. Take up rate was about 62%. Nevertheless sales had picked up for the past 2 months after the completion of viewing deck and improvement to access road. Reflection residence: Reflection residence is a service apartment located at Mutiara Damansara with estimated GDV of RM289m. The project is strategically located in the vicinity of The Curve, IPC Shopping Centre and IKEA. Comprises of 299 units of apartments, the freehold development was launched at end-mar 212 and take up rate is about 83%. Latest selling price is RM8psf while launch price is RM75psf. Affordable township development in Klang Valley: There are 2 on-going township developments in Klang Valley, Saujana Utama and Saujana Rawang. These projects are located at the new growth area of Klang Valley with affordable selling price of around RM4k for a DSTH. Saujana Utama is located at Sungai Buloh. Spanning over 1, acres with total GDV of RM1.7b. Saujana contributed average RM35m per quarter for the past 2 years. Remaining GDV of Saujana Utama is RM211m. New launches: Recent launches for Saujana Utama is Warisan link bungalow with total GDV of RM7m. The bungalows are priced from RM75k onwards. Take up is about 55%. Latest launch is The Duplexes comprises of 22 unit of 2-storey shops with estimate GDV of RM35m. Saujana Rawang: Saujana Rawang located near Bandar Country Homes Rawang. Total GDV for the project is RM1b and balance GDV is RM588m. Recently, Glomac launched 2 new phase, Zara 2 and Egrata. Zara 2 comprises of 26 units of 2-storey Zero Lot bungalows with total GDV of RM24m. Mainly comprises of 123 units of DSTH with total GDV of RM51.8m. The project was launched in Apr 213.

5 5 Future Projects Glomac have sufficient future pipeline to sustainable launches in the near term including: I. New township at Cyberjaya / Putrajaya with RM1.2bn GDV. 231 acres to be modeled after successful BSU development. Target is for maiden launch in 1H 214. Putrajaya, Cyberjaya and KLIA are within 3km radius. KLIA, Cyberjaya, Putrajaya catchment area. Easy access to MEX, Elite and LDP II. 2 acres BSU extension to generate RM8m GDV. Continuing on success of current township III. Plaza Kelana Jaya phase 4. A RM25m mixed development project located a long side LDP highway right next to Kelana Jaya Stadium. Financials: Property sales were on the uptrend from FY1-FY12 after the recovery of property sales (refer to pg 3) from the slump in FY9. Earnings increase by a compounded annual growth rate of 19.3% per year from FY8 to FY12. Dividend per share paid had increase from 3.4 sen per share to 4.3 sen per share. Increase in dividend paid had rise in tandem with the increase in earnings. Based on dividend of 5.5 sen paid in FY12, translate into yield of 4.3%. Glomac had a dividend payout ratio of 4%. RM'm Revenue and profit trend 5 year CAGR FY8 FY9 FY1 FY11 FY12 Revenue (LHS) Net Profit (RHS) RM'm Sen Dividend Paid FY8 FY9 FY1 FY11 FY12 Net DPS (LHS) Dividend Yield (RHS) %

6 6 Valuation: We are initiating coverage on Glomac with a BUY recommendation. We arrived at our target price of RM1.46 by ascribing PER of 8.7 against FY14 EPS of 16.8sen. PER of 8.7 is a 1-year historical average. We like Glomac due to the following: (i) (ii) (iii) (iv) On track to meet sales target of RM75-8m and strong unbilled sales of RM827m Core developments are landed residential and township projects located at Prime location (Lakeside Residence at Puchong) or new growth area (Saujana Utama Sungai Buloh and Saujana Rawang). Landed residential property is the most resilient type of property with sustainable demand. Healthy balance sheet with net gearing level of.19x. Sufficient capacity to gear up for land acquisition 4% dividend payout ratio which translate to estimated dividend yield of 3.2% to 4.9% for FY13 to FY15 DAILY PRICE CHART Zulkifli Hamzah Sean Liong Cheng Fatt Sean.Liong@midf.com.my

7 7 Appendix Financial Highlights (FYE April) Profit & Loss (RM m) FY11 FY12 FY13F FY14F FY15F Revenue ,75.8 Gross Profit Operating Expenses (36.5) (83.7) (47.8) (55.9) (72.2) Operating Profit EBITDA Depreciation & Amortisation Net Interest Income (3.1) (.7) PBT Tax (36.8) (41.5) (45.9) (54.6) (69.6) PAT Balance Sheet (RM m) Land held for Development Other Fixed Asset Total Non Current Asset Cash and Cash equivalents Property Development Cost Inventories Trade Receivables Other Current Asset Total Current Asset ,16.8 Total Asset 1, , , , ,77.3 Trade Payables Short term borrowings Other Current Liabilities Total Current Liabilities Long term borrowings Other Non Current Liabilities Total Non Current Liabilties Total Liabilities Total Shareholder fund Source: Annual Report, MIDFR estimation

8 8 Realisable Net Asset Value Projects Total Outstanding GDV (RM m) Stake NPV (RM m) Glomac Damansara 35 1.% 51.8 Glomac Cyberjaya 1 1.% 14.8 Glomac Cyberjaya % 17.8 Glomac Centro 15 1.% 22.2 Bandar Saujana Utama % 31.2 Saujana Rawang % 77.9 Sri Saujana % 41.2 Lakeside Residences % Others 41 1.% 57.2 Plaza Kelana Jaya, Phase % 37. Saujana Utama 4 (SU Sg Buloh) 8 1.% 16. Cyberjaya/Putrajaya 12 1.% TOTAL 6, Unbilled sales Shareholders equity RNAV per shares 2.49 Source: Annual Report, MIDFR estimation

9 MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad ( X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL Total return is expected to be >15% over the next 12 months. Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between -15% and +15% over the next 12 months. Negative total return is expected to be -15% over the next 12 months. TRADING SELL Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 9