Mixed outlook for Glomac on below-expectation FY24 performance

PETALING JAYA: Analysts have mixed views on property developer Glomac Bhd , as its performance for financial year 2024 (FY24) came in below expectations.

Glomac closed its FY24 ended April 30 with a 25.11% year-on-year (y-o-y) drop in net profit to RM23.59mil, or an earnings per share of 3.07 sen, due to higher construction costs as well as a rise in interest expense.

Its FY24 revenue saw a 21.78% y-o-y fall to RM266.73mil, which was attributed to the completion of several development projects in FY23.

“Newly launched projects, although enjoying brisk sales, are still in the initial stage of development and yet to contribute significantly to group revenue,” Glomac stated in its filing with Bursa Malaysia.

AmInvestment Bank Research (AmInvest Research) noted that Glomac’s core net profit of RM7mil came in 55% below its earlier FY24 forecast and 53% below street forecast.

“The variance to our forecast was mainly due to a lower-than-estimated core net profit margin as a result of increased construction cost and finance expense,” it added.

AmInvest Research downgraded its “buy” call on Glomac to a “hold” with a lower fair value price of 40 sen per share based on a 31% to 37% downward adjustment to Glomac’s FY25 and FY26 core net profit after accounting for a lower-than-expected core net profit margin.

MIDF Research, meanwhile, stated the developer’s weaker earnings were in line with lower revenue as progress billings from its projects came in weaker-than-expected.

“The lower gross profit margin of 28% in FY24 against that of 31% in FY23 dragged earnings mainly due to earnings recognition from lower-margin projects, namely Seri Kenanga Rumah Selangorku.

“On a positive note, the balance sheet of Glomac remains healthy with a low net gearing of 0.06 times,” MIDF Research stated in a report on the developer.

It also downgraded Glomac from a “buy” call to “neutral” but kept its target price unchanged at 43 sen per share. The research house also slashed earnings forecast by 35% and 24% for FY25 and FY26 to factor in lower progress billings and lower margins.

On a brighter note, TA Research stated that despite missing earnings expectations, Glomac recorded a substantial increase in new property sales in its fourth quarter (4Q24) as it reached RM217mil as compared to RM148mil in the same quarter in the previous year.

This had boosted the total new property sales for FY24 to RM360mil, a 19.2% y-o-y spike, surpassing TA Research’s sales assumption of RM300mil.

“As a result of the strong property sales in 4Q24, the group’s latest unbilled sales increased from RM347mil in 3Q24 to RM504mil, providing earnings visibility over the next two years,” it said.

That being said, TA Research has slashed its earnings estimates for Glomac in FY25 and FY26 by 13% and 17%, respectively, after taking into account Glomac’s FY24 performance, the revised sales, progress billings and margin assumptions.

TA Research maintained its “buy” call on Glomac with a new target price of 63 sen per share.

This is as it believes better days are ahead for the property developer.