Investment Highlights

• We maintain our HOLD recommendation on Eco World Development (EcoWorld) with an unchanged fair value of RM1.30 per share (Exhibit 2). We made no changes to our FY18-20 earnings forecasts.

• EcoWorld registered its 9MFY19 core net profit of RM97.2mil (+22.3% YoY) largely due to contribution from main projects and higher profit contributed by JVs.

• Despite making up only 63% of our full-year forecast (consensus – 55%), we reckon this to be in line with expectations as we expect stronger earnings in coming 4Q in light of the OnlyEcoWorld Campaign accompanied by the EcoWorld Help2Own (EW-H2O) financing package.

• For the 10 months ended 31 Aug 2018 Ecoworld recorded new sales of RM2bil, more than double the RM923mil recorded in the first 6 months ended 30 April 2018. Meanwhile unbilled sales of RM4.5bil will provide earnings visibility for the next 2-3 years.

• 3QFY18 EBIT margin improved to 10.8% from 10.0% YoY as a result of lower selling and marketing expenses (-64% YoY).

• Presently, Ecoworld has numerous ongoing projects with remaining landbank of 4,977.2 acres bearing a total GDV of RM71.6bil which provide long-term earnings visibility and will drive the company’s growth going forward.

• Meanwhile EcoWorld’s 27% associate Eco World International Berhad (EWI) recorded its maiden profit in 3QFY18 following the commencement of delivery of completed property units at London City Island in the UK. EcoWorld’s share of EWI’s profit in 3QFY18 amounted to RM2.8mil, compared to a share of loss of RM6.5mil in 3QFY17.

• In August 2018, EWI via its 70%-owned UK JV, EcoWorld London announced the signing of heads of terms with a substantial North American pension fund to build more than 1,000 BtR residential and commercial units on two sites in Kew and Barking, London, with a value of close to £400mil (RM2.1bil).

Source: AmInvest Research - 21 Sept 2018