23 July 2013 Visit Note Glomac Berhad Focusing on a resilient market segment Reiterate BUY Target Price (TP): RM1.46 INVESTMENT HIGHLIGHTS Saujana Utama and Saujana Rawang offering affordable homes Lakeside Residence connectivity will improve in the future Commercial components of Lakeside Residence potentially raise total GDV significantly Maintain BUY with a target price of RM1.46. We visited the sites of 3 major on-going township development of Glomac recently. The followings are the key takeaways: (i) Saujana Rawang: Saujana Rawang is a landed township project which is located at the growing Jalan Batu Arang Corridor in Rawang. Measuring about 345 acres, the leasehold development started in 2008. Total gross development value (GDV) of Saujana Rawang is RM1.05b. Remaining GDV is RM573m and RM283m will be launched in FY14. The infrastructure works will be completed by year end/early 2014 which will enhance the connectivity to the Jalan Batu Arang main road. Self-contained township: Saujana Rawang is a self-contained township supported by the commercial component. There are 130 units of shop offices in the township. Currently 64 units had been launched with take up rates of 92%. The shop offices are priced between RM700k to RM1m. Affordable residential properties: The most recent launch is Egrata, double storey terrace house (DSTH) with built up of 22 X75 and priced below RM500k. 122 units were launched in early June 2013 and the take up rate has reached 80%. In addition to that, they also launched Zero Lot Bungalow with price ranging from RM800k to RM1.6m. Glomac plans to launch 2 more phases of DSTH and Semi-D. The Semi-D will be price at about RM1m. Rawang: Major on-going projects in Rawang include M Residence Rawang (Mah Sing), Emerald West (GuocoLand), Bandar Country Homes (Tanco Properties Sdn Bhd), Regency Parc (Next Fortune Sdn Bhd) and Saujana Rawang (Glomac). Saujana Rawang properties selling price have been increasing mainly due to increase in market price (more developers venturing into Rawang), better connectivity in the future (Jalan Tasik Puteri will soon be connected to the Kuala Lumpur-Kuala Selangor Expressway (LATAR), and escalating price of properties closer to KL City Centre. RETURN STATS Price (22 Jun 13) RM 1.28 Target Price RM 1.46 Expected Share Price Return 13.88 % Expected Dividend Yield 3.92 % Expected Total Return +17.80% STOCK INFO KLCI 1797.68 Bursa / Bloomberg Board / Sector Syariah Compliant 5020/GLMC MK Main/Properties Yes Issued shares (mil) 708.80 Par Value (RM) 0.50 Market cap. (RM m) 931.60 Price over NA 0.97x 52-wk price Range RM0.78 RM1.41 Beta (against KLCI) 1.14 3-mth Avg Daily Vol 2.65m 3-mth Avg Daily Value Major Shareholders Tan Sri Dato Mohd Mansor Datuk Fong Loong Tuck RM3.17m 19.86% 16.40% Dato Fateh Iskandar 15.63% KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES
MIDF EQUITY BEAT INVESTMENT STATISTICS FY Apr FY12 FY13F FY14F FY15F Revenue (RM m) 652.4 665.9 761.5 882.2 EBITDA (RM m) 170.0 158.3 174.5 196.6 Pretax Profit (RM m) 161.1 152.9 171.1 193.4 Net Profit (RM m) 85.2 101.5 120.9 136.9 Net Profit Margin (%) 13.1 15.2 15.9 15.5 EPS (sen) 13.8 14.7 16.7 19.0 EPS Growth (%) 39.8 6.8 13.7 13.2 PER 7.9 7.4 6.5 5.8 Net DPS(sen) 4.2 4.9 5.0 5.7 Dividend Yield (%) 3.9 4.5 4.6 5.2 Source: Company, Forecasts by MIDFR Ii Saujana Utama: Bandar Saujana Utama (SU) is an established township with over 1,000 acres fully developed. In total, 7659 units of residential and commercial property had been sold which include a small neighborhood mall known as SU Mall. A complete range of amenities are available including primary and secondary schools, commercial hub, hypermarket (Central Market), and police station. Population at the township is about 50K and is expected to increase to 70K upon the completion of phase 4 of SU. Some of the well-known retailers like Guardian and KFC are already present in the township while McDonald s and Petron are negotiating to set up their premises, reflecting a mature population. Latest phase: SU 3 is the on-going phase. Semi-D (RM750k to RM900K) and terrace houses (RM450-RM490K) are priced affordably. There are currently 600 acres of land to be developed in SU. SU4 is the upcoming phase with total GDV of RM800m. Measuring about 200 acres, the project will be launched in February 2014. The development consists of 2,633 units of properties which include 1420 unit of DSTH, 948 units apartments, and 263 units of apartments. Pricing of DSTH for SU4 Size Total units Tentative selling price (RM 000) 18 X 60 164 150 20 X 60 298 180 20 X 70 696 350 22 X 75 275 390 Affordable Homes 15 X 55 360 120 Catalyst: The project is easily accessible via highways like LATAR, NPE, GUTHRIE, DASH, and other trunk road. UITM Puncak Alam is building a new main entrance which will shorten the journey from SU to the campus to 5 min. The management foresees growing demand for rental properties in SU as the campus only provides accommodation for their students in first and second semester. Currently the rental for a DSTH is around RM1K. In addition to that, UITM is also building a hospital and a hotel which is expected to raise demand for properties in SU. iii. Lakeside Residence: Lakeside Residence is the new flagship development of Glomac. Measuring about 200 acres, the leasehold land will be developed into a mixed township development with total GDV of RM2.7b. Since 2012, Glomac had launched RM242m (Phases 2 to 4) worth of properties achieving overall take up rate of 94%. The development is one of the up-coming developments in the booming Puchong Township like Millenia City, Lakeside City, The Wharf, Abadi Heights, and Taman Tasik Prima. It is also one of the many lakeside developments in Puchong. Lakeside Residence is located behind Tesco Puchong and less than 3KM from IOI Mall Puchong. Other nearby developments includes YTL land s Lakeedge Puchong and Malton s Mutiara Puchong. These 2 projects had been completed. Pricing of Lakeside Residence properties are within the range of the selling price of Lakeedge and Mutiara Puchong in the secondary market. 2
MIDF EQUITY BEAT Lakeside Residence (development type) Acreage % Launched projects Type GDV (RM'm) Units Built Up (sq ft) Selling price (RM '000) Launch Date Residential 68 34 Phase 2-Sonata DSTH 75 105 2,107 to 2,358 From RM680 Sep-13 Commercial 32 16 Phase 3-Symphony DSTH 107 139 2,167 to 2,279 From RM728 Jan-13 Recreational (with lake) 37 19 Phase 4- Avory DSTH 54 75 2,226 to 2,350 From RM775 Mar-13 Infrastructure and Utilities 63 31 200 100 Phase 5* DSTH 63 77 - - End 2013 *Selling price not announced yet. In total, Glomac plan to launch RM254m worth of properties in FY14 Potential improvement in connectivity & environment: Most of the new developments in Puchong are located at the Southern part of Puchong whereas Lakeside Residence is located at a more strategic location closer to Petaling Jaya and KL. The driving distance from LDP-Petaling Jaya Selatan Interchange to Lakeside Residence is only about 7KM. The connectivity of the project is expected to improve as there is a proposal to build a bridge across the Klang River, linking the existing Jalan Perindustrian Puchong near Lakeside Residence to USJ 1 area (refer to appendix 3). The future link will shorten the journey from Puchong to Subang tremendously. Developers had already committed fund to construct the bridge. In addition there will also be a proposed dedicated road connecting the development to LDP. Glomac will also improve the quality of the lake to create a better environment. Mixed development: The Company is currently finalizing the plan for a high-rise mixed development component of Lakeside Residence. Located next to the Klang River, the concept of the mixed development will be similar to Plaza Damas or Publika. There will be boutique offices, SOVO, shop offices, service apartments, and possibly a small neighbourhood mall with around 300K net lettable area. Subject to the authority s approval, potential gross floor area of the mixed development will be around 7-8m sq ft which will increase the total GDV of Lakeside Residence significantly. Currently the company is still focusing on the residential components of Lakeside Residence. The mixed development is planned to be launched in the next 4 years, after the residential area becomes more mature and accessibility improves (Link Bridge from Puchong to USJ 1) Valuation: We are reiterating our BUY recommendation for Glomac with a target price of RM1.46. We arrive at our target price by ascribing PER of 8.7X against FY14 EPS of 16.7sen. We like Glomac due to: I. Record sales of RM802m and unbilled sales of RM888m; II. Core developments (80% of outstanding GDV) are landed residential projects located at prime location (Lakeside Residence at Puchong) or new growth area (Saujana Utama Sungai Buloh and Saujana Rawang); III. Potential curb in developer interest bearing scheme (DIBS) will not affect Glomac. Landed developments are more popular products hence incentives like DIBS are not offered to buyers; and IV. Unofficial dividend payout ratio of 40%. DAILY PRICE CHART Zulkifli Hamzah Sean Liong Cheng Fatt Sean.Liong@midf.com.my 03-2173 8227 3
4 MIDF EQUITY BEAT Appendix 1. Saujana Rawang 2. Saujana Utama
5 MIDF EQUITY BEAT 3. Lakeside Residence Summary of project @ 4QFY13 Total GDV (RM 'm) Remaining GDV (RM 'm) Unbilled sales (RM 'm) Estimated Launches in FY14 (RM 'm) Lakeside Residences 2,700 2,424 172 254 Saujana Rawang 1,045 573 140 283 Glomac Damansara 977 375 136 375 Sri Saujana, Johor 722 276 16 50 Glomac Centro 545 150 162 150 Bandar Saujana Utama 1,653 142 102 35 Glomac Cyberjaya 2 258 120 47 0 Glomac Cyberjaya 222 100 0 0 Reflection Residence 0 0 113 0 Others 401 401 0 0 New projects Saujana Utama 4 (SU Extension @ Sg Buloh) 800 800 0 0 Cyberjaya/Putrajaya 1,200 1,200 0 160 Plaza Kelana Jaya, Phase 4 250 250 0 0 Total 10,773 6,811 888 1,307
6 MIDF EQUITY BEAT Realisable Net Asset Value Projects Total Outstanding GDV (RM m) Stake NPV (RM m) Glomac Damansara 350 100.00% 51.8 Glomac Cyberjaya 100 100.00% 14.8 Glomac Cyberjaya 2 120 100.00% 17.8 Glomac Centro 150 100.00% 22.2 Bandar Saujana Utama 211 100.00% 31.2 Saujana Rawang 588 100.00% 77.9 Sri Saujana 289 100.00% 41.2 Lakeside Residences 2318 100.00% 296.3 Others 401 100.00% 57.2 Plaza Kelana Jaya, Phase 4 250 100.00% 37.0 Saujana Utama 4 (SU Extension @ Sg Buloh) 800 100.00% 106.0 Cyberjaya/Putrajaya 1200 100.00% 133.3 TOTAL 6,777 886.8 Unbilled sales 132.8 Shareholders equity 778.1 RNAV per shares 2.49 Source: Company, MIDFR estimation
MIDF EQUITY BEAT MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - 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 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. SELL 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. 7