It has been yet another promising year for Glomac Bhd. Business Today looks at some of the events that shaped its growth and performance.

It is interesting to observe Glomac Bhd, which is a 21-year old company, has a winning overall track record and still comes up with fresh ideas in its field of expertise.

In early 2009, the company stated its intentions to sell half of its currently offered properties, worth RM400 million in conjunction with its 21st anniversary. This included medium-priced houses to high-end condominiums and commercial properties.

In terms of property market trends, there has been a hike in the property market particularly houses worth RM300,000 and below, said Datuk FD Iskandar Mohamed Mansor, group managing director/chief executive officer. With the current market conditions, the company needed to be realistic in projecting sales targets and property launches.

In 2009, it had six new property projects apart from 13 or 14 ongoing projects. Another three new commercial projects were being planned and will be launched when the market improves. The company’s gross development value for its ongoing projects was RM2.8 billion, Iskandar said.

Despite having some cautionary flags thrown in, Glomac has continued to perform well and aims to achieve at least 15% increase in earnings for the financial year ending 30 April 2010, supported by its projects in hand. For FY09, it reported a 8.12% shortfall in net profit to RM32.3 million on revenue of RM351.57 million.

Iskandar said the group currently had in the pipeline, property projects with an estimated gross development value of about RM3 billion that would last for another five years.

“The five-year period is based on our average launch of about RM600mil in projects a year. We are optimistic of achieving the target figure as we know what our current unbilled sales are now.

“Apart from that, we managed to lower our gearing level to 0.12 times now from 0.35 times and this will certainly help our cashflow to be more positive,” he said.

Iskandar noted Glomac had about 400ha for future development and was seeking selected parcels of land to acquire in the Klang Valley, as part of efforts to expand its landbank.

“We are not looking for bigger plots of land. Instead, we are looking for niche land in the Klang Valley as the most important thing is the location. We plan to develop commercial and residential projects if we manage to buy the land,” he said.

Recovery in Sight
Many property experts are convinced that the property sector will likely make a full recovery from the poor global and regional economic conditions by 2010. There has however, been some bright spots such as improved consumer confidence especially among buyers and investors in some choice locations. Analysts expect the property market to pick up by the second half of 2010.

He added that commercial properties were currently picking up based on the recent launch of the group’s commercial projects. “Our Glomac Damansara and Glomac Cyberjaya for example, received very positive take-up when launched just recently,” he said.

Glomac is also in the midst of identifying potential business ventures in the Asia-Pacific region after making inroads into Thailand and Australia. For the first quarter ended 31 July 2009, Glomac recorded a net profit of RM8.3 million on revenue of RM59 million compared with RM7.8 million and RM79.5 million in the previous corresponding period.

Aside from this, last year Glomac Bhd’s wholly-owned subsidiary, Glomac Damansara Sdn Bhd entered into a sales and purchase agreement with Lembaga Tabung Haji for the disposal of a 25-storey office block for RM170.7 million. The property would be completed and handed over to Lembaga Tabung Haji within 36 months from the date of the building plan approval. The development order was obtained on Sept 24.

It is understood that the proposed sale will enhance Glomac’s future earnings and substantially reduce Glomac’s working capital requirements for the development of this project. Glomac Bhd reaped a higher net profit of RM9.3 million in its second quarter ended October 3, 2009 against RM7.7 million in the previous corresponding period.

Revenue for the period was lower by 17% at RM75.6 million compared with RM91 million previously partly due to the completion of its Suria Stonor condominium project, the company said in news reports.

Iskandar said: “Robust development activities and a strengthened balance sheet have placed us on a stronger growth platform. We are confident of achieving better results this year, and success in our new projects such as Glomac Damansara and Glomac Cyberjaya will contribute positively to our performance in the next two financial years.”

Future Progress
The group turned in a net cash position of RM19.9 million as at end-October, and is expected to improve further with proceeds from the disposal of its investment properties earlier in the year.

“Going forward, our recent acquisition of 7.6 acres in Petaling Jaya for RM31.2million will add to the group’s already strong prime future development projects,” he added.

In upcoming months, Glomac plans to launch new phases with a targeted gross development value (GDV) of RM500 million in five of its ongoing projects in its current financial year ending 30 April 2010.

The new phases are a mix of residential and commercial projects, including a low-cost housing project in a joint venture with Perbadanan Kemajuan Negeri Selangor (PKNS), said Iskandar. The projects that would launch a new phase are Glomac Damansara, Saujana Utama, Bandar Saujana Utama, Seri Bangi and Glomac Cyberjaya.

“The Seri Bangi low-cost residential housing project is a joint venture between us and PKNS,” Iskandar said. He said the group aimed to achieve RM500 million in sales this year from its 11 ongoing projects, which have a total GDV of RM3 billion. Glomac was seeing an improvement in consumer sentiment in line with the gradual recovery seen in the economy.

“We are not out of the woods per se, and the economy needs to recover first before the effect can be felt in the different sectors,” he said, adding he expected a full economic recovery by next year.

Glomac posted a 13.5% rise in net profit to RM8.34 million in its first quarter ended 31 July 2009 despite a 40.9% fall in revenue to RM58.99 million. The higher profit was due mainly to the stronger contributions from Glomac Tower and recognition of fair value gain for Block B Glomac Business Centre.

On the forthcoming 10th Malaysia Plan, Iskandar hoped that property taxes would be reduced to increase the purchasing power of consumers. He also said state governments should take up low-cost housing initiatives to relieve private companies of the additional burden.

Finally, he hoped that the government should do more to promote the Malaysian property market to attract foreign interest.