AmWatch, 26 Jun 2009

STOCK FOCUS OF THE DAY
Glomac Bhd : Re-rating catalyst remains to be seen HOLD

We maintain our HOLD rating on Glomac Bhd (Glomac) with higher fair value of RM0.76/share based on a 50% discount to our estimated NAV of RM1.50/share. Glomac’s FY09 earnings of RM32mil are in line with ours and street’s estimates of RM31mil. Glomac’s earnings YoY declined 8% from RM35mil.

This was offset by a fair value gain from sale of Wisma Glomac. The group managed to generate sales of about RM30mil during its sales campaign in conjunction with its 21st anniversary. New pre-sales to be underpinned by its commercial development in Glomac Damansara (GDV - RM800mil) where the group has sold 51% of the first phase (GDV - RM53mil).

We estimate earnings to decline 5% YoY to RM31mil in FY10F and to grow 4% in FY11F to RM32mil. Glomac’s current balance sheet is relatively healthy with net gearing of 12% of shareholder’s funds (as at end of April 09) versus 29% in the preceding quarter. Currently Glomac is trading at a steep discount of 50% to our estimated NAV of RM1.50 and we believe Glomac would continue to be trading at such a steep discount given lack of re-rating catalyst.

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