9MFY4/14 core net profit of MYR71m (+1.1% YoY) was below expectations.

Lowering FY14/15/16 earnings forecasts by -12%/-7%/-4%.

Downgrade to HOLD with a new TP of MYR1.20 (-7sen; 0.6x P/RNAV.

What’s New

Glomac’s 3QFY4/14 net profit of MYR22.7m (-11% YoY, -6% QoQ) lifted 9MFY4/14 net profit to MYR86m (+22% YoY). 9MFY4/14 core net profit was lower at MYR71m (+1% YoY) ex-land sale gain, making up just 65-67% of our and consensus full-year estimates with the shortfall mainly due to lower-than-expected operating margin on higher construction and land conversion premium costs.

Meanwhile, the QoQ decline in earnings was due to a MYR15m net gain from the sale of its Australian investment in 2QFY4/14. Glomac has proposed a 2.25sen interim NDPS; in line.

What’s Our View

9MFY4/14 new property sales were MYR368m (-29% YoY), just 51% of its FY4/14 sales target of MYR720m, owing to the deferment of ≈MYR500m worth of new launches to FY4/15 on weak market sentiment and the delay in project approvals. Management has cut its FY4/14 sales target to MYR500m (-38% YoY). Unbilled sales totaled MYR792m as at end-Jan 2014 (1.0x our property revenue forecasts).

We lower our FY14/15/16 earnings forecasts by -12%/-7%/-4% to factor in: 1) lower sales assumption of MYR515m (from MYR712m) for FY14; and 2) the latest land purchase in Mukim Ijok (62.5 acres; MYR300m GDV; 20% pretax margin). Our RNAV is lowered by -13sen to MYR2.00 due to a lower land price assumption of MYR14psf for the Mukim Ijok land. This reflects the latest asking prices around that area. Our TP implies a capital gain of <10%

Source: Maybank Research - 20 Mar 2014