Glomac: Part III

Judging from the earnings we witnessed, Glomac's half-year net profit of 14.178 million simply paled in comparison to OSK full year estimate earnings of 52.8 million.

Well the first thing I was interested is whether OSK realised that such earnings simply underperformed OSK's rosy expectations.

Well, OSK acknowledged this fact by remarking the following.

• Below expectations. Glomac’s annualized 1HFY06 results were 46.2% below our full year forecast RM52.8m and 38.4% below consensus estimates. The shortfall was largely due to extremely weak 1Q results due to a mismatch of revenue and cost. Recall that Glomac expensed off marketing costs of RM7m in 1Q while billings from Suria Stonor had not kicked in yet.

Ah... but OSK still continued to remain positive with Glomac...

• Unbilled sales stood at RM384m. With the inclusion of sales of Suria Stonor units, Glomac’s unbilled sales ballooned up to RM384m compared to RM298m as at end July. This represents 1.1x our FY06 top-line forecast.

There is unblilled sales mah. (Actually, me too smart on this unbilled sales thingy. I have no idea why a property develper has stuff like billed and unbilled sales in their books.. )

• Resilience of earnings to interest rates hike. We believe Glomac’s sales will not be totally vulnerable to risk of interest rates hike. At least RM376m or 49% of Glomac’s FY06 launches of RM766m are high-end or niche developments, the buyers of which tend to be less sensitive to a rise in interest rates.

Hmm... I was just wondering about if the recent interest hike would be a concern or not. With higher rates, there is a possiblity that the rates would damper property sales. But OSK deem this as a non-issue. Cos according to OSK, Glomac properties are high-end or niche developments for the rich buggers. The rich uncles and aunties. According to OSK, these rich buyers tend to be less sensitive to interest rates hikes.

Hmm... true kah?

I wonder if all rich uncles and aunties think the same way....

• Maintain earnings forecast. We believe Glomac’s series of disappointing performance is over. Stronger quarterly performance should be in store as contribution from Suria Stonor has started to flow in. With sales to-date being double of last year, earnings performance should be stellar. We are maintaining FY06 and FY07 earnings forecast at RM52.8m and RM80.5m respectively.

Hmm... half year to date, Glomac managed net profit of only 14.178 milion.

Now if OSK maintains such earnings for FY 2006, then Glomac should be earning some 38.6 million for the remaining 2 quarters of Glomac's current fiscal year.

Oh this works out to some 19.3 million per quarter.

This quarter, Glomac only managed to earn 9.811 million.

Hmm.... OSK is still soooooooooooooo optimisitc on Glomac.

Glomac closed yesterday at 0.995 sen (ehm... when OSK recommended a buy on Glomac in Sept 2005, Glomac was trading at 1.36!) and OSK maintains their buy target price of 1.96 for Glomac.

Soooooo... tell me.... should i follow their recommendation and buy this stock?

:P