Investment Highlights

• We maintain our BUY recommendation on Eco World Development (EcoWorld) with an unchanged fair value of RM1.13 per share (Exhibit 2). We made no changes to our FY19-21 earnings forecasts.

• EcoWorld registered its 1HFY19 net profit of RM71.5mil (+35.1% YoY). Despite making up 40% and 36% of our and consensus full-year forecast, we reckon this to be in line with expectations as we anticipate stronger earnings 2HFY19.

• 1HFY19 earnings were largely contributed by projects namely 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. Meanwhile, stronger results from JV projects namely Eco Grandeur, Eco Horizon, Eco Ardence and Bukit Bintang City Centre (BBCC) have also contributed to the group’s higher earnings.

• EcoWorld recorded new sales of RM1bil in the first seven month in FY19 as compared to RM923mil YoY thanks to the official launch of the National Home Ownership Campaign (NHOC) on 1 March 2019.

• EcoWorld’s 27% associate Eco World International (EWI) registered a 1HFY19 net profit of RM10.8mil compared with a loss of RM36.6mil YoY. This is mainly due to earnings recognition from the UK projects especially during 1QFY19. Several residential blocks at London City Island and Embassy Gardens are scheduled for handover soon; and we shall expect stronger earnings contribution from EWI in 2HFY19.

• We believe the outlook for FY19 to remain positive supported by unbilled sales of RM6.1bil and an increasing number of maturing projects in Malaysia. Moreover, management is confident to deliver stronger performance in 2HFY19 based on the current sales momentum and higher earnings recognition from EWI.

• 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 - 28 Jun 2019