Developer Glomac Bhd sees exciting days ahead as the boom in Singapore, reportedly the hottest property market in the world this year, is extended into Malaysia. Glomac is stepping up its plans to market larger commercial properties
(TheStar 23/7/07)
Glomac Bhd has long been known for developing commercial properties in the Kelana Jaya area and a township in Rawang, Selangor.
It could be due to this perception that Glomac's share price trailed at RM1.67, having seen better days in 2004 when it reached a high of RM3.38. This went against the grain in the property sector where many stocks are around their 52-week, or even record, highs.
This under-performance of Glomac's price was also partly caused by its flattish earnings during the last three years, when net profit was held at around RM39mil each year, compared with the steady growth of some of the other property companies.
That performance gap is set to change as Glomac has a couple of high-value commercial projects in the pipeline.
It will be building the proposed 40-storey Glomac Tower on a site close to the Petronas Twin Towers, where values are soaring.
An srtist's impression of Glomac's Plaza Kelana JayaGlomac and Al Batha Real Estate Co of United Arab Emirates acquired the land for RM57mil cash. “We bought the land six months ago for RM1,000 per sq ft (psf) and today, the land itself is worth RM2,000 psf,” Datuk Richard Fong, Glomac executive chairman, told StarBiz.
The company is considering a few options. “One option is to sell it off the plans. A second option is to sell it on completion with tenants,” he added. The attraction of a sale on completion is the office building could be launched at a price of RM1,000 psf, but Fong reckoned it could be worth RM1,500 psf by the time of its completion in two years.
Glomac is keen to capture the value in its projects after the experience with its Suria Stonor condominium.
A year and a half years ago, it sold about half of the units in Suria Stonor to ING Real Estate at 600 psf, which ING later sold RM1,100 psf. Now ING has stopped selling, preferring to keep the rest of its units to sell on completion, Fong said. Suria Stonor is under construction and is also located near the KLCC area.
Besides Glomac Tower, the group plans to develop a sizeable mixed commercial project near Damansara Kim in Petaling Jaya. This project, currently called Lot 73, Jalan Damansara, has a gross development value (GDV) of about RM500mil.
It is believed both Glomac Tower and Lot 73 could have pre-tax profit margins of around 30%, much higher than its margin of just 11% for the year ended April 30, 2007. Furthermore, as both projects carry high GDVs, the company should perform much better in 2009.
Glomac has a market value of RM367mil, which is small for a developer in the Klang Valley. DNP Holdings Bhd, which is developing a luxury condominium in the KLCC area and from which earnings would be booked in 2009, has a market value of RM832mil. DNP, however, is a member of the Wing Tai Holdings Ltd group, which has a market value of S$2.7bil (RM6bil) and is well-regarded there for its high-end properties.
With a long track record of developing commercial properties, Glomac is expected to execute its planned projects successfully. Its current commercial project, Glomac Boulevard in Kelana Jaya, is fully sold. This has a GDV of RM90mil.
Glomac launched properties with a combined GDV of RM189mil in its 2007 financial year while its launches for 2008 would expand to RM1.1bil. “These are exciting times in the property market,” as Fong put it.
