Glomac out of its comfort zone
Posted on | March 19, 2007
By ANGIE NG
GLOMAC Bhd is excited about the potential for greater market visibility with its line-up of more interesting residential and commercial projects worth some RM1.2bil over the next three years.
The group is looking at growth of between 15% and 20% a year and is confident of sustaining a dividend payout of 9 sen per share over the next two financial years. For the first-half year ended Oct 31, 2006, Glomac recorded net earnings of RM8.4mil and revenue of RM124.9mil.
Unbilled sales of more than RM300mil and new product launches worth over RM700mil are expected to improve the company’s earnings visibility for the current financial year ending April 30.
The nearly completed Suria Stonor and Glomac Boulevard projects will also contribute to higher earnings outlook.
In the year ended April 30, 2006, net earnings totalled RM38.1mil on revenue of RM285mil. Property development contributes more than 90% of the group’s earnings, with the balance from property investment.
Glomac has more than RM108mil invested in commercial properties, mostly office space in the Klang Valley, which yields annual rental income of RM8mil a year.
According to group managing director Datuk F.D. Iskandar, the absence of new “impactful” projects in the last two financial years was the main reason for the group’s uninspiring performance.
Most of the launches in the last two years were mainly in existing township products. Realising this shortcoming, the management is initiating greater efforts to reverse the lull period for Glomac and ensure the group gets into the spotlight again.
“The line-up of more niche developments that have higher margins and faster project turnaround time will do well to raise Glomac’s profile and performance once again,” he told StarBiz.
The success of Glomac Boulevard, which recorded an 85% take-up rate since its launch last year, has prompted the management to seriously look at increasing its exposure in the commercial property sector.
The commercial projects earmarked for launch this year comprise a Grade A office building within the vicinity of the Kuala Lumpur City Centre; a mixed development project in Jalan Damansara, and Glomac Galleria in Cheras.
The most outstanding project will be the 40-storey Grade A office block fronting the Mandarin Oriental Hotel with more than 500,000 sq ft in net lettable space.
“We are excited on the project’s potential as the shortage of Grade A office space in Kuala Lumpur is still quite acute. At a conservative monthly rental of RM8 to RM9 per sq ft, the building can offer net yield of at least 9%,” Iskandar said.
The 1.6-acre land in Jalan Pinang was purchased in early December last year for RM58mil or RM1,000 per sq ft. Planned for launch early next year, the RM450mil building will most likely be sold en-bloc to an institutional buyer.
The next project to be launched next year is a RM42.8mil mixed commercial development project along Jalan Damansara, adjacent to Taman Tun Dr Ismail, Kuala Lumpur.
The 6.8-acre project featuring shop offices, office suites and serviced apartments with saleable space of more than a million sq ft will generate a gross development value (GDV) of RM500mil.
Iskandar said the two commercial projects would be the main income drivers for Glomac for the next three to four years.
Meanwhile, Glomac Galleria on 1.3 acres in Sri Hartamas, comprising 16 units of 3½-storey shop offices and a 15-storey office tower, is targeted for launch later this year.
With net lettable area of 300,000 sq ft, the project will yield a GDV of RM120mil.
Glomac also plans to kick off a mixed development project on 28 acres in Section 8, Bandar Baru Bangi, next year. Comprising mainly double-storey terrace houses and 2- and 3-storey shop offices, the project is worth a GDV of RM120mil.
To diversify its earnings base, the group has also spread its wings overseas by investing in an office-cum-retail complex in Melbourne and a warehouse in Bangkok. Both are 50:50 joint ventures with Australian and Thai partners respectively.
Iskandar said the Aussie venture, which was formed in August last year, would yield annual rental income of RM6.9mil and offered good potential for capital appreciation or redevelopment. The 500,000-sq-ft warehouse in Bangkok has secured a 15-year lease with a multinational corporation that will provide an average yield of 11% a year.
“We are also pursuing other real estate deals in Vietnam and India to enhance the company’s long-term recurrent income and potential for capital gains,” Iskandar said.
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