Glomac - undiscovered gem from Osk

At  first glance, Glomac’s FY12 results  appear to be ahead of expectations, but excluding  the gain from  disposal of an associate, its core net profit was  only largely within expectations, accounting for 101% and 97.5% of our and consensus FY12 forecasts respectively. Revenue  went up  9.7% y-o-y on  higher progress  billings from its ongoing projects,  while core net profit  jumped  25.7% y-o-y, underpinned by improved margins. We maintain our forecasts and BUY call at an  unchanged FV of RM1.04, based on 0.9x CY12 P/NTA, which is about 1.0σ above  the stock’s 10-year historical mean.

Largely within forecasts.  Glomac reported a net profit of RM85.8m for FY12, which
included a net gain  arising from  disposal  of  its 49% stake in Thailand-based WHA
Glomac Alliance Company Limited. Excluding this disposal gain, Glomac’s core net profit
stood at RM79.2m, accounting for around 101% and 97.5% of our and consensus’ FY12
net profit forecasts respectively. Despite an 8.1% y-o-y revenue contraction in 9MFY12,
the company’s  full-year FY12 revenue  still went up by  9.7% y-o-y, mainly  attributed to
aggressive progress billings from its ongoing projects in 4QFY12, as well as the  final
revenue recognition from the completed Glomac Tower project. In tandem with the
revenue growth,  its  core net profit for FY12 was  higher  by 25.7%, fuelled by  better
margins,  lower MI charges and a lower effective tax rate.

Healthy growth. Glomac recorded total sales  of more than RM663m for FY12, which
was above its target of RM500m. This was driven by the strong response to its township
projects in Bandar Saujana Utama and Saujana Rawang, as well as contributions from
Glomac Damansara Residences and Glomac Centro. The company’s unbilled sales were
healthy, rising to RM733m as at end-4QFY12. The recent launch of the much anticipated
39-storey Reflection Residences in March 2012 was well-received. The freehold serviced
apartment project in Mutiara Damansara with a total GDV of RM270m recorded a takeup rate of  90%. Glomac has a strong pipeline of strategic projects with GDV  totaling
more than RM7bn  to be launched over the next few years. Given its healthy balance
sheet, we believe  that the company would have  the financial muscle to acquire more
landbank as well as participate in the privatization of government land.

Maintain BUY. We maintain our forecasts and BUY recommendation at an unchanged FV of RM1.04, based on 0.9x CY12 P/NTA, which is about 1.0σ above the stock’s 10-year historical mean.

FYE April (RMm) FY09 FY10 FY11           FY12 FY13f
Total Revenue  345.3 318.1 601.5 655.6 733.8
Net Profit  32.0 40.7 63.0 85.8 93.1
% chg y-o-y -9.0 27.4 54.6 36.1 8.5
Consensus  - - - 81.2 97.5
EPS (sen) 10.8 6.9 10.6 14.1 15.7
Gross DPS (sen) 7.0 4.3 4.8 5.5 5.5
Gross Div. Yield (%) 8.0 4.9 5.5 6.3 6.3
PER (x) 8.1 12.7 8.2 6.2 5.6
BV/Share 1.74 0.93 1.01 1.04 1.13
P/BV (x) 0.5 0.9 0.9 0.8 0.8
ROE (%) 6.3 7.6 10.9 13.9 14.2
ROA (%) 2.7 3.6 5.0 6.3 6.5