Investment Highlights

• We maintain our HOLD recommendation on Glomac with an unchanged fair value (FV) of RM0.40/share, based on a discount of 40% to revised RNAV and neutral ESG rating of 3-star .

• The FV implies a FY26F PE of 17x – 20% premium to its 4- year average.

• We recently visited Glomac’s Lakeside Residences show office in Pusat Bandar Puchong to view its Loop City condominium project , which carries a RM340mil GDV comprising 980 units of small offices/home offices and serviced apartments - 842 open units and 138 under controlled housing scheme.

• The 450 sq ft units are priced at RM320k while the 750 sq ft units at RM560k which offer 2 car parks/unit. For the RMM (Rumah Mampu Milik) affordable scheme, the 450 sq ft units are priced at RM230k and 550 sq ft RM270k.

• Although open for registration since October last year, the take up rate has only reached 20% and is expected to reach 25% in a few weeks’ time. Hence, the developer has not officially launched this leasehold project at this stage.

• We note that the Puchong market tends to be skewed towards landed properties vs. high rise. Also, priced at the higher range of RM711-RM747 psf, the tepid sales pace stems from strong competition with 4 nearby high-rise residential projects currently being offered to home buyers:
  
  i) WYN Residences by Land and General – with pricing starting at RM486k-RM550 for 1,546 units. Located on leasehold land, the units have built up space of 700-850 sq ft with prices at RM650psf-RM700psf. This is more strategically located next to IOI Mall Puchong and the LRT Puchong Jaya station.
  
  ii) 2Rio Residence in Bandar Puteri Puchong by IOI Properties Group (BUY, FV: RM2.83/share) start from RM643k at an attractive RM595psf. Located on freehold land, the 632 units range from 764 sq ft to 1,012 sq ft.
  
  iii) Danau Puchong by YTL Land in Bandar Puchong Jaya. Located on leasehold land, the project offers 428 units at a compelling RM522-RM600 psf or RM340k-RM532k for 566-999 sq ft.
  
  iv) Avantro Residences by Chin Hin Property in Bandar Kinrara at RM528k-RM853k for units ranging from 872 sq ft to 1,216 sq feet. Located on freehold land, the units are priced at RM530-RM753 psf.

• The Loop City JV project, of which Glomac has a 51% effective stake and Al Batha Real Estate 49%, is adjacent to the group’s already established Lakeside Residences.

• While Lakeside Residences has a total GDV of RM4bil on 188 acres of land, it has launched properties worth RM885mil to date with a take up rate of 90%. This project currently has a remaining land of 75 acres and unbilled sales of RM233mil, accounting for 46% of Glomac’s unbilled sales of RM504mil as at 30 April 2024.

• The group has launched KEYS Phase 1 which has a GDV of RM239mil. Launched over 2 releases with 98 units of Semi-Ds at an average RM2.4mil/unit, Glomac has secured a take up rate of 63% as at end-Apr 2024. For KEYS Phase 2 in 3QFY25, the group plans to launch 70 units of Semi-Ds (3,200 sq ft) at a slightly lower price of RM2.3mil/unit with a GDV of RM158mil.

• We believe Glomac’s slow takeup rate for Loop City stems from the multiple condominium projects being launched within a township which favours landed properties. For now, we expect that Glomac’s FY25F revenue and CNP to be supported by its unbilled sales of RM504mil (+45% QoQ), which represents a cover ratio of 1.4x FY25F revenue . We expect the group’s unbilled sales to be replenished with planned launches totalling RM425mil in FY25F.

• As Glomac is currently trading at an unexciting FY26F P/E of 19x vs. a 4-year average of 14x, we see limited upside for the stock price.

Source: AmInvest Research - 9 Jul 2024