Further regional diversification for Glomac

Fateh Iskandar: We have to pace the launches in Malaysia. Photo by Chu Juck Seng

KUALA LUMPUR: Glomac Bhd’s group managing director Datuk Fateh Iskandar Mohamed Mansor’s years of training in the property development company has prepared him for the uphill task of navigating the firm through today’s stormy economic seas.

A backdrop of weaker consumer demand in Malaysia has prompted the developer to trim its plannned launches in the country to some RM400 milllion annually from original estimates of about RM700 million.

Hence, further geographical diversification within the region, possibly in Indonesia, is deemed pivotal to spur the growth of the company which had ventured into Australia and Thailand in recent years.

In July 2006, Glomac marked its overseas ventures via the acquisition of an office building in Lonsdale Street, Melbourne, for A$30.5 million (RM77.25 million) to boost its property investment portfolio.

Subsequently, in January 2007, Glomac announced its acquisition of a 49% stake in Thailand-based Warehouse Asia Alliance Company Ltd (WAA) for 151.9 million baht. WAA, which specialises in warehousing and logistic services in Bangkok, owns about 315,000 square metres of warehousing space.

Glomac’s investment in WAA is deemed strategic in anticipation of high capital appreciation and rental yield in view of the attractive long-term lease of warehousing space.

“We have to pace the launches (of properties in Malaysia),” said Fateh Iskandar, who also this week assumed the role of chief executive officer, taking over from his father and founding member Tan Sri Mohamed Mansor Fateh Din who remains as group executive chairman.

“Location-wise, we are looking (to see) if there are good buys,” Fateh Iskandar told reporters yesterday at a briefing on the company’s latest real estate sales promotion called Glomac 360 Showcase.

Glomac has 15 projects worth some RM3 billion in the Klang Valley, Melaka and Johor. Unbilled sales as at January 2009 stood at RM381 million which is expected to sustain earnings in the next two years.

Unbilled real estate sales refer to the value of properties sold which have yet to be recognised in the books.

“It is a slowdown (but) we hope to achieve some good sales,” Fateh Iskandar said, when asked on the developer’s latest marketing initiative, through which the firm is offering some RM400 million worth of properties for sale.

Under the latest initiative, buyers are exempted from sales and purchase agreement legal fees, and loan documentation charges. The promotion includes full loan for property purchases and easy payment scheme.

Glomac’s net profit rose 0.3% to RM9.56 million in its third quarter ended Jan 31, 2009 from RM9.53 million a year earlier, while revenue fell 5.5% to RM81.13 million from RM85.82 million, due to fewer construction jobs and lower income from its real estate projects. It proposed an interim tax-exempt gross dividend of 2.5 sen a share.

Analysts are still optimistic on the firm’s prospects. RHB Research Institute Sdn Bhd raised its earnings forecast for Glomac by 16.5% to 17% for FY09 and FY10. The estimates took into account higher operating profit margins due to weakening raw material prices and lower construction losses.

“The risks include potential cancellation of purchase agreement by buyers in the absence of funding, competition from peers, and delays in launches and approvals,” RHB Research analyst Low Yee Huap wrote in a note.

The research house rates Glomac shares a “market perform” with a fair value of 60 sen.

By The EDGE Malaysia (by Chong Jin Hun)