Glomac Bhd’s first nine months of financial year 2023 core net earnings of RM17.5 million came in below expectations, making up 42% and 47% of MIDF Research and consensus full year forecasts respectively.
Glomac Bhd (Glomac) is a real estate development and management company, with a portfolio ranging from residential, commercial, townships and mixed development properties.
“The negative deviation was mainly due to lower than expected progress billing, higher than expected tax expenses and higher than expected operating expenses in quarter three financial year 2023,” said MIDF Research in a recent report.
Sequentially, quarter three financial year 2023 core net earnings tumbled to RM0.4 million (-94.8% quarter-on-quarter), in line with lower topline (-15.8% quarter-on-quarter).
The decline in earnings were mainly due to lower progress billing, highervoperating expenses and higher marketing expenses. Besides, earnings were also impacted by higher tax rate due to effect of non-recognition of deferred tax assets on loss-making companies.
That led cumulative earnings in the first nine months of financial year 2023 lower at RM17.5 million (-18.3% year-on-year) despite a higher top line (+12.9% year-on-year). Revenue was higher in the first nine months of financial year 2023 due to higher progress billing as construction activities resumed from lockdown in the first nine months of financial year 2022.
Key projects that contributed to earnings in the first nine months of financial year 2023 include ongoing phases at Saujana Perdana, 121 Residences and Plaza @ Kelana Jaya.
Glomac recorded new property sales of RM48 million in quarter three financial year 2023, lower than the new sales of RM54 million in quarter two financial year 2023. That brought total new sales to RM154 million in the first nine months of financial year 2023.
Meanwhile, unbilled sales eased marginally to RM448 million in quarter three of financial year 2023 from RM491 million in quarter two of financial year 2023, providing 2 years earnings visibility.
Looking forward, MIDF Research expects new sales in financial year 2023 to be higher than new sales of RM160 million in financial year 2022, underpinned by planned launches with total gross development value of RM510 million in quarter four financial year 2023.
Planned launches in quarter four financial year 2023 includes GreenTec (gross development value: RM340 million), Saujana KLIA (gross development value: RM100 million) and Lakeside Residences (RM70 million).
MIDF Research has revised their earnings forecast for financial year 2023 future/2024 future/2025 future by -36%/-17%/-3% to factor in the lower progress billing and higher expenses.
Trading price for Glomac has also been revised to RM0.43 from RM0.48, as MIDF Research widened revised net asset value discount to 75% from 72% due to weaker earnings visibility in the near-term.
“Nevertheless, we maintain buy call on Glomac as we are positive on its new sales outlook, driven by launches of its township projects that target mid-market and affordable segment. Besides, balance sheet of Glomac is healthy with net gearing of 0.2x in quarter three financial year 2023. Valuation is also undemanding, trading at 79% discount to its latest net tangible assets per share of RM1.52,” said MIDF Research.
