GLOMAC COMPANY UPDATE
Monday, March 29, 2021
FBMKLCI: 1,601.42
Sector: Property
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*
Glomac Bhd TP: RM0.51 (+32.0%) Last Traded: RM0.39 On Stronger Position to Fuel Future Growth BUY (ESG: ★★★) | |
Thiam Chiann Wen | Tel: +603-2167 9615 cwthiam@ta.com.my www.taonline.com.my |
Key takeaways from a results conference call include: 1) 9MFY21 results boosted by swift construction progress, 2) expects 27-35% YoY decline in FY21 property sales, 3) landed residential homes achieved strong take-up, 4) looking forward to a better FY22. We continue to like Glomac's strategy, which focuses on affordable landed residential segment, solid unbilled sales of RM611mn to anchor near-term earnings, as well as its healthy balance sheet to provide ample liquidity for on-going and future development activities. We raise FY21-FY23 earnings by 34-67% after incorporating the latest update and management guidance. Maintain Buy with a higher TP of RM0.51, based on 0.35x FY22 P/Bk.
Share Information | |
Bloomberg Code | GLMC MK |
Stock Code | 5020 |
Listing | Main Market |
Share Cap (mn) | 768.1 |
Market Cap (RMmn) | 299.5 |
52-wk Hi/Lo (RM) | 0.47/0.27 |
12-mth Avg Daily Vol ('000 shrs) | 593.2 |
Estimated Free Float (%) | 24.5 |
Beta | 0.5 |
Major Shareholders (%) |
9MFY21 results boosted by swift construction progress
Despite disruptions caused by Covid-19, Glomac's 9MFY21 results beat expectations with YTD revenue and core net profit rising 34% and 40% YoY to RM250.9mn and RM23.5mn. Specifically, we saw the group's 3QFY21 core net profit grow by 28% QoQ to RM11.7mn as construction activities continued to pick-up pace. Besides swift construction progress, we gather that the stellar results were also lifted by margin expansion arising from better economies of scale, on-going cost rationalisation exercise, and lower finance costs.
Expects 27-35% YoY decline in FY21 property sales
The reintroduction of movement restrictions since Oct-20 has caused some delays in the timing of Glomac's planned new launches. The group only managed to launch RM260mn worth of new launches in FY21, from RM403mn targeted previously - see Figure 1. It was about 31% less compared with RM378mn worth of products launched last year. As such, management expects FY21 property sales to come in the range of RM250mn-280mn, representing a 27-35% YoY decline in property sales.
Figure 1: Launched RM260mn Worth of Launches in FY21
Source: Glomac, TA Research
Landed residential properties achieved strong take up
While FY21 property sales were lower-than-expected, we gather that all the new launches were well-received, achieving commendable take-up rate of 90% - see Figure 2. Apart from product specific appeals such as reasonable pricing and strategic location, management believes the strong sales were partly driven
Dato Fateh Iskandar (19.1)
Datuk Fong Loong Tuck (17.0)
Lembaga Tabung Haji (10.4)
Forecast Revision
Forecast Revision (%) Net profit (RMmn) Consensus
TA's / Consensus (%) Previous Rating
Buy (Maintained)
Financial Indicators
FY21 | FY22 |
67.0 | 37.9 |
32.6 | 40.2 |
19.5 | 29.2 |
167.0 | 137.8 |
FY21
FY22
Net gearing (%)
27.5 23.0
CFPS (sen)
2.5 7.6
P/CFPS (x)
12.2 4.1
ROA (%)
1.7 2.1
NTA/Share (RM)
1.4 1.5
Price/ NTA (x)
0.2 0.2
Share Performance (%)
Price Change
GLMCFBM KLCI
1 mth
3 mth
6 mth 12 mth
30.0 1.5
21.9 (2.1)
25.8 6.5
30.0 19.2
(12-Mth) Share Price relative to the FBMKLCI
Source: Bloomberg
Page 1 of 4
by innovative digital marketing campaigns, partnership with Maybank Islamic HouzKEY home financing solution, and favourable government incentives such as the home ownership campaigns.
Looking forward to a better FY22
Underpinned by: 1) maiden launch of GreenTec Puchong (mixed development, total GDV: RM1.6bn), 2) resilient demand for landed properties for its existing townships, 3) solid unbilled sales of RM611mn (or 3x of FY20 property revenue) to anchor earnings, and 4) narrower loss for Glo Damansara Mall (Glo Mall). Management believes Glomac is on a stronger footing to deliver better financial performance in FY22. Various revenue and cost optimisation implemented for Glo Mall have shown encouraging results. In terms of strategy to boost occupancy, management reveals the group has appointed a leading marketing team to actively look for potential tenants to operate in Glo Mall. As the retail sector is set to rebound along with the successful rollout of Covid-19 vaccination in the country, management sees promising improvement in Glo Mall's occupancy in coming quarters.
Forecast
Considering the latest update and management guidance, we now project Glomac to report FY21/FY22/FY23 net profit of RM33mn/RM40mn/RM55mn, from RM20mn/RM29mn/RM37mn previously.
Key revisions to our model include: 1) change in progress billings and margin assumptions as we previously expected the group's performance to be negatively impacted by the reintroduction of movement restrictions and, 2) change in FY21/FY22/FY23 new property sales assumption to RM260mn/ RM490mn/ RM510mn from RM370mn/ RM400mn/ RM450mn previously.
Valuation
Rolling forward our base-year valuation to FY22, we arrive at higher target price of RM0.51 (previously RM0.43), based on higher P/Bk multiple of 0.35x (previously 0.3x), slightly above the group's 5-year mean of 0.33x. Given the group is set to enter a new growth cycle, we believe our attached valuation is not excessive. Note that the group's 10-year average P/Bk multiple is 0.51x.
We like Glomac's strategy, which focuses on affordable landed residential segment, solid unbilled sales of RM611mn to anchor near-term earnings, as well as its healthy balance sheet (0.3x net gearing with RM199mn cash and bank balances) to provide liquidity for on-going and future development activities. Maintain Buy.
Key downside risks to our recommendation include: 1) surge in Covid-19 infections that lead to fresh lockdowns, 2) slower-than-expected economy recovery, and 3) Glo Damansara Mall remains under-occupied for an extended period.
Figure 2 : New Launches Sales Performance
Development TypeNo of Units
Average
SizeAverage Pricing/Unit
Estimated
GDVLaunch Period
Sales Performance
Saujana Perdana Tresna Triandra (2-Storey Terrace - 3D1) Mawar Sari
(2-Storey Terrace - 4B) Dahlia Sari
120 120 120
20'x70' 22'x75' 22'x75'
RM510k
RM508kRM62mn
RM66mnLaunched in
1Q Launched in
3Q Launched in Feb 2021
53% sold as at 31 Jan 2021 84% sold to-date 84% sold as at 31 Jan 2021 97% sold to-date
RM529k
RM67mn
Received healthy response
(2-Storey Terrace - 4C)
Total
360
RM195mn
Saujana KLIA Primrose
(2-Storey Terrace - 4B1)
123
20'x60'
RM530k
RM65,mLaunched in Mar 2021
Received healthy response
Source: Glomac, TA Securities
Earnings Summary
Profit & Loss (RMm) YE Apr 30 2018 2019 2020 2021f 2022f 2023fBalance Sheet (RMm) YE Apr 30 2018 2019 2020 2021f 2022f 2023f Revenue E B ITDA 402.4 273.4 245.8 326.6 375.4
Dep. & amortisation Net finance cost PBT Normalised PBT Taxation (3. 6) (3.7) (7.3) (7.3) (6.9)
31.0 29.2 38.9 42.8 52.9
172.6 480.0 652.6 1278.6 154.7 466.0 620.7 1259.9 176.6 461.1 637.7 91.2 1257.0
| |
PER | 8.0 16.5 19.1 7.4 6.0 4.4 S hareholders ' funds 1094.9 1089.6 1094.7 1115.5 1141.1 1178.8 |
Normalised PER GDPS (x) Div Yield (s en) (%) 21.0 1.5 4.8 30.5 0.8 2.6 9.0 1.0 3.2 7.4 2.0 6.5 6.0 2.5 8.1
1913.4 1899.4 1897.6 1927.3 1982.3 2082.7 PBT Adjus tments Dep. & amortisation Changes in WC Operational cash flow Capex 2018 56.4 23.6 3.6 2019 37.8 12.9 3.7 2020 20.0 40.0 7.3 2021f 42.8 17.7 7.3 2022f 52.9 17.0 6.9 2023
(34.7) 48.9
Others 0.0 Investment cash flow Debt rais ed/(repaid) Equity raised(repaid) Dividend (68.0) 15.2 14.9 6.8 (5.0) 0.0 (35.0) (35.0) 0.0 0.0 EBITDA Margins PBT Margins
1.1 0.6 20. 8 7.7 0.7 0.4 23.4 2.5 0.7 19.7 2.9 1.7 3.6 4.8 2.1 2.7
20.8 13.1 20.5 19.7 14.1 14.8 6.5
(35.0) 21.0 (0.1) (11.6) (0.1)
Financial cash flow Net cash flow (10.1) (29.2) (26.3) (33.7)
(31.8) (12.1) 6.3 65.1
Assumptions YE Apr 30 2018 2019 2020 2021f 2022f 2023f Revenue Pretax Profit
(2.5)
20.8 1.6 23.5 37.4 2.9 5.1 |
(THIS PAGE IS INTENTIONALLY LEFT BLANK)
Stock Recommendation Guideline
BUY : | Total return within the next 12 months exceeds required rate of return by 5%-point. |
HOLD : | Total return within the next 12 months exceeds required rate of return by between 0-5%-point. |
SELL : | Total return is lower than the required rate of return. |
Not Rated: | The company is not under coverage. The report is for information only. |
Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.
ESG Scoring & Guideline
Environmental | Social | Governance | Average | |
Scoring Remark | Glomac has identified and began carrying out various eco-friendly initiatives focused environmental protection. | Adequate measures taken to ensure the safety and livelihood of its employees as well as corporate social responsibility contributions. | The Board is made up of seven directors, of which four are independent (57%). It has only one female director. It holds investor briefings semi-annually, demonstrating good transparency and disclosure practices. | |
★★★★★ (≥80%) : Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions.
★★★★ | (60-79%) : Above adequate integration of ESG factors into most aspects of operations and management and future directions. |
★★★ | (40-59%) : Adequate integration of ESG factors into operations and management and future directions. |
★★ | (20-39%) : Have some integration of ESG factors in operations and management but are insufficient. |
(<20%)
★
: Minimal or no integration of ESG factors in operations and management.
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Monday, March 29, 2021, the analyst, Thiam Chiann Wen, who prepared this report, has interest in the following securities covered in this report:
(a) nil
Kaladher Govindan - Head of Research
TA SECURITIES HOLDINGS BERHAD (14948-M)
A Participating Organisation of Bursa Malaysia Securities Berhad
Menara TA One
22 Jalan P. Ramlee
50250 Kuala Lumpur Malaysiawww.ta.com.myTel: 603 - 2072 1277
Fax: 603 - 2032 5048
Attachments
- Original document
- Permalink
Disclaimer
Glomac Bhd published this content on 29 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 March 2021 07:25:01 UTC.
