Eco World Development’s (ECW) 3QFY22 net profit came in at RM46.4m (+32.0% Yoy, +1.6% QoQ), below our forecast but within consensus. YTD, the Group cumulative 9M net profit of RM155.4m (+11.1% YoY) constituted c.62% and c.72% of our and consensus full year estimates, with the earnings falling short mainly due to slower than expected billings and higher than expected share of losses from Eco World International (EWI). Sales momentum is still encouraging however, with 10-month sales already at RM3.44bn and almost meeting its FY22 sales target of RM3.5bn. Unbilled sales as at end-Aug 2022 stood at RM4.2bn. All told, we adjust FY22-24 earnings downwards by c.14% to account for changes in billing assumptions and lower profits from overseas projects. We maintain our Neutral call with a new TP of RM0.75, pegging it at the average of -1SD and mean PBV, given its relatively good sales momentum and improving balance sheet.

• Secures RM3.44bn pre-sales in 10 months. ECW is on track to exceed its FY22 sales target of RM3.5bn, with c.98% of the target achieved in 10 months. The key contributors of new property sales so far were Eco Business Park I, II and III (RM446m), Eco Horizon (RM448m), and Eco Majestic (RM401m). Elsewhere, the Group’s industrial product sales (Eco Business Park I, II, III and V) stood at RM730m as of 10MFY22, up 84% YoY on stronger demand, following the reopening of borders in Apr 22, which is already 151% higher than its FY21 full year industrial sales. Unbilled sales remain healthy at RM4.2bn.

• EWI’s losses expected to narrow. ECW recorded a share of loss of RM12m in EWI in 3QFY22, mainly due to lower profit contribution from its Australian projects and revision of profit margins on JV projects in the United Kingdom in 3QFY22. EWI expects to improve its profits in 4QFY22 with the handover of remaining units in Millbrook Park Phase 2 and commencement of unit handover for Kew Bridge Verdo. Separately, EWI secured RM1.7bn sales in 10 months into FY22, accounting for 85% of its FY22 sales target of RM2bn. Of the RM1.7bn new sales, RM1.58bn were from its London projects and RM153m were from Australia. Unbilled sales as at end-August 2022 stood at RM948m with booking pipeline of RM361m.

Source: PublicInvest Research - 19 Sept 2022