TA Research said Glomac’s management reiterated intentions to ramp up annual launches to between RM700mil and RM800mil from its financial year ending April 30, 2027.
PETALING JAYA: The disposal of two adjoining parcels of leasehold land in Puchong by Glomac Bhd
is primarily “an execution de-risking move” amid challenges at the Loop City development, analysts say.
Glomac, via its 50.13%-owned subsidiary, Glomac Al Batha Sdn, is selling the two parcels of land in Bandar Metro Puchong to Sunway Kiara Sdn Bhd for RM97.3mil.
The land, part of an approved master development plan for a project called Loop City, had been designated for serviced apartments.
According to TA Research, the disposal consideration translates to an implied price of about RM330 per sq ft, which represented a slight discount to the independent market valuation of RM339 per sq ft.
However, the research house said this was still a meaningful premium over the properties’ net book value of around RM265 per sq ft as of the end of last April.
Proceeds from the disposal will be mainly utilised to pare down borrowings with the balance allocated towards working capital.
“While the proposed disposal provides incremental financial flexibility, we do not view it as balance-sheet driven. As of the end of last October, Glomac’s net gearing stood at a low 0.01 times, supported by a healthy cash balance of RM228.7mil, well below the sector’s average net gearing of about 0.4 times,” TA Research said in a report.
It added that Glomac’s management reiterated intentions to ramp up annual launches to between RM700mil and RM800mil from its financial year ending April 30, 2027 (FY27) and towards this end will continue to explore land acquisitions in the Klang Valley and Johor.
“However, we note that there has been no material progress on land acquisitions, suggesting that near-term focus remains on executing existing projects rather than aggressive expansion,” the research house said.
It noted that sales momentum has been weaker than expected at the 15.3-acre Loop City integrated development.
“More than a year after its April 2024 launch, take-up at Loop City Residences remains low, reflecting limited market acceptance amid intense competition in Puchong’s crowded high-rise segment.
“The partial monetisation of the site reduces Glomac’s exposure to a slow moving development and limits further capital lock-up in a challenging micro market,” added TA Research.
The planned launch of Sunway Bhd’s adjacent development in 2027 could introduce future competition, but the research house said it believes near-term cannibalisation risks would be mitigated by the staggered timing and potential differentiation in product positioning.
“We maintain our target price of RM0.33 per share, based on 0.21 times FY26’s price-to-book value, which represents a significant discount to the 0.7 times average implied price-to-book ascribed to small-cap developers.
“This is also slightly below Glomac’s 10-year forward price-to-book average of 0.23 times, reflecting weaker earnings delivery and execution risks,” said TA Research.
With the stock trading close to its assessed fair value and limited scope for earnings, the research firm said “the risk reward has turned unfavourable”.
“Accordingly, we downgrade Glomac to ‘sell’ from ‘hold’, as upside potential appears capped in the absence of clear re-rating catalysts in the near term.”
At the time of writing, the shares were trading at 34 sen.
