Glomac

Glomac reported its earnings yesterday.

Just came across this research report..

Here is the earning comparisons.

It wasn't pretty. On a q-q basis, net earnings dropped some 74.9%.



But despite earning just 4.2 million, this research report still insists that Glomac will earn some 49.7 million for its Fy 2007 or some 45.5 million for the remaining 3 quarters!

Isn't this being too optimistic?

So this research report admits that Glomac earnings is below their full year forecast by some 67.9% and they said it loud and clear that it was a weak quarter.

So they issue a Neutral call.

Down so much still Neutral?

And here comes this....

See their NEUTRAL call?

But do you see that their TARGET is at a whopping 1.51????

Isn't that irony?

Here's their reasoning:

By the way, don't you get confused by the misleading news articles which focus on irrelevant issues such as sale revenue of XBZ stock up by YYY%???

Here is the link to one such article: Glomac revenue up 13% to RM52.8m (Sounds good from the title, eh)

Glomac: Part IV

Just noted that Glomac reported its quarterly earnings.

For quick ref to past blog posting on Glomac:

1. Glomac
2. Glomac: Part II
3. Glomac: Part III

Tuesday March 28, 5:11 PM
TABLE: Malaysia's Glomac 3Q Net MYR7.10M Vs MYR9.80M

   Glomac Bhd (5020.KU) - Malaysia
   3rd quarter ended Jan. 31:
   Figures are in Ringgit (MYR).
                                 2006               2005
Revenue                 MYR68,652,000      MYR65,171,000
Pretax Profit              11,633,000         12,161,000
Net Profit                  7,098,000          9,801,000
Earnings Per Share           3.34 Sen           4.56 Sen
Dividend                     4.00 Sen           4.00 Sen
   9 months ended Jan. 31:
Revenue                   190,395,000        196,075,000
Pretax Profit              32,603,000         40,659,000
Net Profit                 21,276,000         30,075,000
Earnings Per Share           9.98 Sen          13.93 Sen
Dividend                     4.00 Sen           4.00 Sen

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

Glomac: Part II

Looking at Glomac earning results, I was wondering what kind of reaction we would have from the local brokerages.

I know OSK is one research house that covers this stock.

So i thought it would be interesting to dig a bit and see what OSK wrote about Glomac previously.

In Sept 2005, OSK had this coverage on Glomac: Glomac: Seen It's Darkest Hour

Note the very interesting first line.

Glomac's annualized 1QFY06 results was a sharp 64.9% below consensus estimates and 69.9% below our full year forecast.

Remember, Glomac only managed a net profit of around 4.367 million, was down some 56.7% against the previous quarter net profit of 9.811 million.

Now the most interesting or rather the most glaring thingy in my opinion is that OSK is projecting/estimating that Glomac will achieve some 52.8 million for this fy 2006.

Ooh-la-la!

And what was even more interesting is that this 52.8 million has been revised down by some 9%!

Amazing! Glomac announced a mere 4.367 million earnings for the first quarter for fy 2006, down some 56.7% on a q-q basis, OSK only revised their estimate earnings by a mere 9% to 52.8million.

Meaning OSK still expects Glomac to make some 48.4 million for the remaining 3 quarters for fy 2006.

Which works out to some 16.1 million earnings per quarter.

Ahem.

Rather optimistic again, isn't it?

Look at what they were saying then:

Trimming FY04/06 earnings forecast by 9.0% to RM52.8m to account for:
1) the abovementioned marketing expenses
2) lower launches (RM65m vs. RM113m earlier) at the Puchong project.
3) These were offset by higher GDV (RM300m raised to RM352m), completion rate (20% raised to 30%) and take-up (60% raised to 70%) at Suria Stonor.
4) We also incorporating RM6.0m contribution from new project Glomac Boulevard.

Look at point 2. The issue of lower launches. Well, as per what OSK is saying, it looks like Glomac is having lower launches but what makes me wonder is the issue of the lower launches. Cos a lower launch of rm65 mil vs rm113 million is pretty significant isn't it?

No?

And the next point OSK mentions:

FY07 earnings forecast is however raised to RM80.5m from the previous RM73.7m on stronger impact from Suria Stonor.

Wah! If fy 2006 was rosy, fy 2007 is even projected to be more rosier for Glomac.

Earnings is forecasted to reach 80.5 million!

Terror is terror is terror!

Glomac then was trading at a price of 1.36. OSK had a target of 1.96.

Which is pretty incredible.

An upside potential of 49.4% for a stock whose quarter-on-quarter earnings slumped by as much as 56.7%.

Cool!


next.... OSK latest write-up on Glomac!

Glomac

Property developer, Glomac, announced its fy 2005 Q2 quarterly earnings last nite.

Quarterly rpt on consolidated results for the financial period ended 31/10/2005

Sales 75.236 million
Net Profit 9.811 million

Which was significantly higher than its fy 2005 Q1 earnings.

Sales 46.507 million
Net Profit 4.367 million

Great improvement from its fy 2005 Q1 earnings. This good performance drew a nice write-up in the Business Times today: Glomac Q2 net more than doubles

So what's wrong with the rosy picture painted?

Well if we were to compare the fy 2005 half-yearly results versus same period fy 2004 half-yearly results, we get the following:

Sales 121.743 million versus 130.904 million
Net Profit 14.178 million versus 20.274 million.

How? Sales now looks flat, while fy 2005 net profit of 14.178 mil pales in comparison to Glomac's fy 2004 earnings of 20.274 million.

So which is a better yardstick to use?

A quarter-on-quarter (q-q) comparison ? or a year-on-year (y-y) comparison?

Here is the past 7 quarterly net profit performance from Glomac. Read from left to right. (right being the latest quarter).

8.871 mil -> 10.086 mil -> 10.188 mil -> 9.801 mil -> 9.985 mil -> 4.367 mil -> 9.811 mil

How?

How would you want to interpret Glomac's earnings performance?

Yes, Glomac did well for the current reported quarter but would you not agree that its current year-to-date earnings performace still pale in comparison when compared to its previous year earnings?