Investment Highlights

• We maintain our HOLD recommendation on Eco World Development (EcoWorld) with a higher fair value of RM0.75 (from RM0.73) per share (Exhibit 1). We increase our FY20–22 earnings forecasts by 4.1%, 1.7% and 1.1% respectively to reflect the timing of revenue recognition.

• We recently met up with EcoWorld for updates on the company’s plans for 2020. Management expects FY20 to remain stable, supported by an increasing number of maturing projects in Malaysia and overseas. EcoWorld registered new sales of RM2.7bil in FY19. The company is maintaining its combined 2-year (FY19–20) sales target of RM6bil.

• For FY20 and beyond, EcoWorld is planning to build wider range of homes with various concepts at affordable prices, suitable for first-time home buyers and the M40 group. Recently, the company introduced its “Design2Own” app that allows customers to create the internal layout of their dream homes, thus increasing options available to cater to a wider audience, especially the younger generation.

• In December 2019, EcoWorld acquired 200 acres of freehold land in Iskandar Puteri for RM1.67bil mainly to capture the M40 group with properties priced between RM300K and RM450K. On top of that, EcoWorld is also planning to launch properties with prices starting from around RM400K in their existing townships in Malaysia.

• For overseas projects, particularly in the UK, management noted that the property market may have bottomed out and believed uncertainties surrounding Brexit have reduced. The UK property market has shown price improvement in the past several months. EcoWorld’s 27%- associate Eco World International (EWI) expects to hand over RM3bil worth of properties (Wardian London, Kew Bridge, London City Island and Barking Wharf) in the UK in 2020. As a result, we shall see stronger earnings from JV & associates for EcoWorld in FY20.

• We believe the outlook for FY20–FY21 remains stable, supported by unbilled sales of RM3.8bil for EcoWorld Malaysia and RM1.3bil for EWI with an increasing number of maturing projects in Malaysia and overseas. Maintain HOLD.

Source: AmInvest Research - 9 Jan 2020