Investment Highlights

• We upgrade Eco World Development (EcoWorld) from HOLD to BUY recommendation with an unchanged fair value of RM1.13 per share (Exhibit 2). We made no changes to our FY19-21 numbers. Our BUY recommendation upgrade is to reflect the recent downtrend in share price which currently offers potential upside of more than 20% while fundamentals persist.

• EcoWorld registered its 1QFY19 net profit of RM30.3mil (+210.4% YoY). Despite making up 17% and 15% of our and consensus full-year forecast, we reckon this to be in line with expectations as we anticipate revenue recognition in the coming quarters.

• 1QFY19 revenue and earnings were mainly contributed by Eco Majestic, Eco Forest, Eco Sanctuary and Eco Sky in the Klang Valley; Eco Botanic, Eco Spring, Eco Summer, Eco Business Park I, Eco Business Park II, Eco Tropics and; Eco Business Park III in Iskandar Malaysia and Eco Meadows and Eco Terraces in Penang.

• The company recorded new sales of RM230mil in the first four month in FY19 as compared to RM500mil in 1QFY18. Despite a slower start, management has announced sales target of RM6bil over FY19 and FY20.

• EcoWorld’s 27% associate Eco World International (EWI) registered its 1QFY19 net profit at RM22.8mil compared with a loss of RM10.2mil YoY. This is mainly due to the completion and delivery of its JV projects in the UK. Construction works at EWl’s projects are progressing well with several residential blocks at London City Island and Embassy Gardens scheduled for handover in FY2019.

• We believe the outlook for FY19 to remain stable supported by unbilled sales of RM6.1bil (RM6.4bil QoQ) and an increasing number of maturing projects in Malaysia.

• Presently, Ecoworld has numerous ongoing projects with remaining landbank of over 4,800 acres bearing a total GDV of more than RM70bil. This provides long-term earnings visibility and will drive the company’s growth going forward.

Source: AmInvest Research - 29 Mar 2019