Friday, June 20, 2014

Glomac - launch at least 4 new developments in 2014

It is acquiring 62.6 acres of leashold land from PPKKS for rm23 million.

The land is located in Sungai Buloh within its existing township of Bdr Saujana Utama and is currently (June 2014) designed for agricultural use. The proposed acquisition is expected to be completed in the financial year ending April 30 2015 and Glomac does not expect any earnings impact in FY2015. The estimated GDV of he land was no disclosed.

There will not be no near term earnings impact. Glomac may also not commence development in FY2016 given that it has rm800 million worth of launches for the extension phase of BSU. The balance sheet impact will also be minimal as the rm23 million land cost would only cause net gearing to rise from 0.20 times. Moreover Glomac is expected to pay the balance 90% of the rm23 million only in FY2015.

This move is viewed positively as it allows Glomac to continue its highly successful rm1.7 billion GDV township.

BSU has been fully launched, following the launch of rm35 million worth of commercial projects in the first half of FY2014. Glomac intends to develop BSU’s extension phase in FY2015.

The risks are slowdown in sales. The positives will be the strong landbanking, branding and execution track record. The negatives are the lack of liquidity/free float.

Going forward, it is seeing a challenging year ahead (2014 & Beyond) as the impact of BNM;s cooling measures sinks in curbing speculative demand.

Glomac had scaled down its GDV target for property launches from rm1 billion to rm700 million in the financial year April 30 2014 due to cooling measures introduced by BNM.

But FY2014 it is targeting to launch developments with a total GDV of rm1 billion.

All those cooling measures have not affected Glomac as they are landed properties and are priced below rm500000. Nevertheless, the GST which will come into force on April 2015 will have an impact on its sales in FY2015.

It is believed that before the start of GST in 2015, there would be a pent up demand for properties especially residential.

By looking at the trends for countries that introduced GST, looked at HK , Japan and Singapore. Six months before the GST was introduced in Japan from 5% to 8%, there is a lot of demand for properties.

Depending on the reaction to GST, Glomac would decide on whether to adjust some of its property launch dates at the end of 2014.

For 2014, it will launch at least four new developments.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.