PP 7767/09/2010(025354)

RHB Research
Corporate Highlights
Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R esults / B rie fing Note

22 September 2010
MARKET DATELINE

Glomac Share Price

Fair Value
:
:
RM1.46
RM1.72
Exceeded Expectations Again Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (Glomac; Code: 5020) Bloomberg: GLMC MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/NTA P/CF ROE Gearing GDY
Apr (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2010 317.8 40.7 13.7 27.4 10.6 - 6.8 0.8 7.6 44.4 5.8
2011f 446.0 58.7 19.7 44.0 7.4 16.0 18.7 0.8 10.7 64.2 8.1
2012f 517.9 72.4 24.3 23.3 6.0 16.2 7.5 0.7 12.2 65.4 10.0
2013f 552.0 85.9 28.9 18.8 5.0 23.0 4.2 0.7 13.8 63.0 11.9
Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

♦ Above expectations. Glomac’s 1QFY11 net profit of RM15.6m (+87% yoy; RHBRI Vs. Consensus
Above
+25% qoq) beat our expectations and consensus by 36-38%, on an annualised
In Line
basis. Turnover increased by 114%, as Glomac Tower project is in full swing
Below
(constructed up to level 30 out of 36 floors). In addition to the sustained
contribution from Bandar Saujana Utama township, developments of newer Issued Capital (m shares) 297.17
projects, such as Glomac Damansara and Glomac Cyberjaya, have progressed Market Cap (RMm) 433.9
beyond initial stage. Meanwhile, PBT margin contracted by 5% pts, due to a Daily Trading Vol (m shs) 0.4
52wk Price Range (RM) 1.123-1.57
RM4.9m one-off fair value adjustment on investment properties recognised in
Major Shareholders: (%)
1QFY10. Excluding the impact, PBT margin roughly expanded by 4% pts to 27%.
Tan Sri Dato' Mohamed 20.5
The percentage increase in net profit was smaller than top-line, largely due to the Mansor bin Fateh Din
51%-owned Glomac Tower project, and hence higher minority interests. Datuk Fong Loong Tuck 17.5
Dato’ Fateh Iskandar 14.4
♦ Unbilled sales remained stable at RM585m. Following the record high
unbilled sales of RM588m in 4QFY10, unbilled sales remained strong at RM585m FYE Apr FY11 FY12 FY13
in 1QFY11, giving one year of earnings visibility. The key project contributors are EPS Revision (%) 28.5 25.3 29.7
Glomac Tower, Glomac Damansara, Glomac Cyberjaya and Bandar Saujana Var to Cons (%) 28.2 50.2 25.5
Utama.
PE Band Chart
♦ RM521m worth of new projects in FY11. A total of RM521m GDV worth
of projects will be rolled out progressively in FY11. These include: Glomac PER = 9x
PER = 7x
Damansara service apartments (RM385m); Bandar Saujana Utama (RM82m) and PER = 5x
Saujana Rawang (RM54m). Beyond FY11, there is still RM2bn worth of projects in
the pipeline.

♦ Forecasts. In view of the stronger-than-expected results and better

earnings guidance by management, we adjust our FY11-FY13 earnings
forecasts by 25-30%, after fine-tuning our margin assumptions and timeline Relative Performance To FBM KLCI
for project launches.

♦ Risks. The risks include: 1) cap on lending rate imposed by Bank Negara Glomac

Malaysia; 2) higher tax bracket for real property gain tax (RPGT); 3) delays in
launches and approvals; and 4) country risks.

♦ Valuations. After we update the balance sheet and adjust RNAV estimate for
FBM KLCI
Glomac, our RNAV/share estimate is revised to RM2.46 from RM2.23. Based on
an unchanged 30% discount to RNAV, our indicative fair value is hence RM1.72
(from RM1.56). We maintain our Outperform call on the stock.
Loong Kok Wen, CFA
(603) 92802237
Please read important disclosures at the end of this report. loong.kok.wen@rhb.com.my

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Briefing Highlights

♦ Unbilled sales remained stable at RM585m. Following the record high unbilled sales of RM588m in 4QFY10, unbilled
sales remained strong at RM585m in 1QFY11, giving one year of earnings visibility. The key project contributors are
Glomac Tower, Glomac Damansara, Glomac Cyberjaya and Bandar Saujana Utama. For Glomac Cyberjaya, 63 units of 3-
storey shop offices with a GDV of RM105m were almost fully sold out. As for the remaining 15-storey office tower with a
GDV of RM95m, Glomac is still looking for an en-bloc purchaser that can match with pricing. Meanwhile, the newly
acquired 7-acre land, which is an extension to the existing Glomac Cyberjaya, is expected to yield a GDV of RM100m.

♦ RM521m worth of new projects in FY11. RM521m worth of new properties will be put into the market
progressively in FY11. These include: Glomac Damansara (RM385m); Bandar Saujana Utama (RM82m) and Saujana
Rawang (RM54m). The impending one will be Glomac Damansara. Two blocks of serviced apartments will be launched in
next few months, with an indicative pricing of about RM600 psf. The company has received strong interest, with 3,000
registrants to-date. Beyond FY11, there is still RM2bn worth of projects in the pipeline – Glomac Damansara (RM208m).
Glomac Cyberjaya (RM95m), Bandar Saujana Utama (RM280m), Saujana Rawang (RM231m), Sri Saujana Johor
(RM272m), Glomac Mutiara (RM230m) – development plan is changed to build service apartments from commercial
centre previously, Glomac Utama (RM400m) and Plaza Kelana Jaya Phase 4 (RM280m).

Risks

♦ Key risks. The risks include: 1) cap on lending rate imposed by Bank Negara Malaysia; 2) higher tax bracket for real
property gain tax (RPGT); 3) delays in launches and approvals; and 4) country risks.

Forecasts

♦ Forecasts. In view of the stronger-than-expected results and better earnings guidance by management, we
adjust our FY11-FY13 earnings forecasts by 25-30%, after fine-tuning our margin assumptions and timeline for
project launches.

Valuations and Recommendation

♦ Investment case. After we update the balance sheet and RNAV estimate for Glomac, our RNAV/share estimate is
revised to RM2.46 from RM2.23. Based on an unchanged 30% discount to RNAV, our indicative fair value is hence
RM1.72 (from RM1.56). We maintain our Outperform rating on the stock.

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Table 2: Earnings Review (YoY Cumulative)
FYE Apr 2010 2011 YoY Observations/Comments
(RMm) 3M 3M Chg
Turnover 59.0 126.3 114%
Property development Significant increase in revenue was due mainly to Glomac Tower, Glomac
54.1 122.8 127%
Damansara and Bandar Saujana Utama.
Property investment 2.8 2.5 (11%)
Others 2.0 1.0 (52%)
EBIT 10.6 28.1 166%
Property development 16.4 2.8 (83%)
Property investment 1.0 0.6 (44%)
Others* (6.8) 24.7 >(100%)
Net inc/(exp) 0.5 1.2 >100%
Associates & JVs 0.5 0.1 (71%)
EI 4.9 0.0 n.m.
Pretax profit 16.5 29.5 79%
Taxation (4.4) (7.4) 67%
Minority interest (3.7) (6.5) 76% Largely from 51%-owned Glomac Tower.
Net profit 8.3 15.6 87%
EPS (sen) 3.0 5.3 78%

EBIT margin 18% 22% 4% pts

Pretax margin Lower margin was due to RM4.9m fair value adjustment on investment properties
28% 23% (5%) pts
in 1QFY10. Excluding the one-off gain, PBT margin expanded by about 4% pts.
Effective tax rate 27% 25% (2%) pts
*Including unallocated corporate expenses and eliminations

Table 3: Earnings Review (QoQ)

FYE Apr 2010 2010 2010 2011 QoQ Observations/Comments
(RMm) 2Q 3Q 4Q 1Q Chg
Turnover 75.6 78.8 104.7 126.3 21%
Property development 72.8 77.0 94.4 122.8 30% Largely driven by higher progress billing from Glomac Tower.
Property investment 2.2 1.7 2.9 2.5 (13%)
Others 0.7 (0.0) 7.4 1.0 (87%)
EBIT 14.5 16.0 27.2 28.1 3%
Property development 13.2 13.1 20.2 2.8 (86%)
Property investment 1.6 1.0 (0.7) 0.6 (175%)
Others* (0.3) 2.0 7.7 24.7 221%
Net inc/(exp) 0.8 0.9 0.8 1.2 57%
Associates & JVs 1.0 0.3 1.0 0.1 (85%)
EI 0.0 0.1 (4.7) 0.0 (100%)
Pretax profit 16.4 17.3 24.2 29.5 22%
Taxation (4.1) (3.5) (5.2) (7.4) 44%
Minority interest (3.0) (3.2) (6.6) (6.5) (2%) Largely from 51%-owned Glomac Tower.
Net profit 9.3 10.6 12.5 15.6 25%
EPS (sen) 3.3 3.6 4.2 5.3 26%

EBIT margin 19% 20% 26% 22% (4%) pts

Pretax margin 22% 22% 23% 23% 0% pts
Effective tax rate 25% 20% 21% 25% 4% pts
*Including unallocated corporate expenses and eliminations

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Table 4 : RNAV Estimate

Area Book value Market value Surplus

Assets (acres) RMm RMm RMm

Development land
Suria Stonor 0.3 (33.5) 34.0 0.5
Suria Residence 45.2 (38.8) 59.1 20.3
Saujana Utama III, Kuala Selangor 93.9 (55.1) 81.8 26.7

Glomac Cyberjaya 8.1 (23.2) 35.3 12.1

New land in Cyberjaya 7.0 (27.4) 27.4 0.0
Plaza Kelana Jaya Phase IV 3.2 (18.2) 19.5 1.3
Mutiara Damansara 2.7 (40.0) 41.2 1.2
Glomac Vantage, Malacca 10.7 (16.2) 9.3 (6.9)
Sri Saujana, Kota Tinggi, Johor 126.1 (69.7) 54.9 (14.8)
(322.1) 362.5 40.4
Total
Investment property Sq ft
Glomac Business Centre 48,815 (17.7) 22.6 4.9
Kelana Business Centre 50,456 (26.8) 22.7 (4.1)
Plaza Kelana Jaya 28,012 (11.0) 11.2 0.2
Total (55.5) 56.5 1.0

NTA @ Apr 10 553.0

NPV of Glomac Tower 48.6
NPV of Glomac Damansara 87.2
RNAV 730.2
Share capital (m) 297.2
RNAV/Share 2.46

Table 5: Earnings Forecasts

FYE Apr (RMm) FY10a FY11F FY12F FY13F

Revenue 317.8 446.0 517.9 552.0

Operating profit 68.6 107.1 133.9 159.7
Interest expenses (1.4) (4.7) (5.3) (5.4)
PBT 74.4 110.9 136.7 162.4
Tax (17.2) (27.7) (34.2) (40.6)
Minority interest (16.4) (24.5) (30.2) (35.9)
Net profit 40.7 58.7 72.4 85.9
EPS (sen) 13.7 19.7 24.3 28.9
DPS (sen) 8.5 11.8 14.6 17.4
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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