Eco World Development’s (ECW) 1QFY22 net profit came in at RM63.4m (+1.5% YoY, +47.9% QoQ) which was largely in line with our estimates but above consensus. Group 1QFY22 net profit constituted 24% and 28% of our and consensus full year estimates respectively. Meanwhile, Group revenue rose 5.1% YoY to RM533m whilst gross profit increased by 13.2% YoY to RM114m in 1QFY22 mainly due to higher sales and realisation of cost savings on completed and near-completion phases. The Group chalked c.RM1.276bn sales from 1 November 2021 to 28 February 2022 (+41.1% YoY), which lifted its unbilled sales to RM3.875bn from RM3.514bn in 4QFY21. All told, no change to our earnings estimates. With current market price nearing our TP, we downgrade ECW to Neutral from Outperform previously with unchanged TP of RM0.98, derived based on c.65% discount to our RNAV estimates.

• Sold RM1.276bn in 4 months. ECW clinched RM1.276bn sales in 4 months from high percentage of increases recorded by its projects in Iskandar Malaysia (+194% YoY), followed by Penang (+110% YoY). Klang Valley projects also performed well with RM709m (+4% YoY) achieved or 56% of total Group sales. The Group noted that the cessation of the Government’s Home Ownership Campaign (HOC) on 31 December 2021 did not have any noticeable impact on its sales momentum which continued to be sustained throughout January and February 2022. We understand that sales of the Group’s completed units also performed well, resulting in further reductions of inventory levels from RM609m in 4QFY21 to RM506m as at 1QFY22. Separately, sales at its four Eco Business Parks totaled RM154m, rising by +43.9% YoY.

• On track to meet its RM3.5bn sale target. With 4-month sales already at 36% of its FY22 sales target, we believe that the Group can again surpass its sales target as sales momentum appears to still be good despite the cessation of HOC at the end of last year. So far, the Group’s main launches include Eco Majestic’s launch of new phases of its Stoneridge Semi-Detached (semi-d), Cluster and Bungalow homes along with the latest Cheerywood terraces; Eco Grandeur’s new garden homes in the Regent Garden precinct and its second phase of shopoffices, Utopia, and Eco Horizon’s launch of Semi-Ds and Bungalows under the Beldon precinct and new garden homes under the Camdon precinct.

Source: PublicInvest Research - 18 Mar 2022