Eco World Development’s (ECW) 1QFY23 net profit came in at RM57m (-10.0% YoY, +>100% QoQ) which we deem broadly in line with expectations as billings were slower due to the Chinese New Year festive period in January, as well as lower contributions during the quarter from several parcels which were substantially completed in FY22. As such, we expect subsequent quarters to be stronger. Group 1QFY23 net profit constituted c.22% and c.23% of our and consensus full year estimates. ECW continued its strong pre-sales momentum in the first 4 months of FY23 after securing RM1.35bn or 38.5% of its FY23 sales target of RM3.5bn. Net gearing as at 1QFY23 stood at 0.33x, with cash and bank balances of RM1bn, giving the Group ample headroom for land-banking (especially in the Klang Valley and Iskandar Malaysia). Unbilled sales rose to RM4.03bn from RM3.58bn in 4QFY22. No change to our earnings estimates for now. All told, we maintain our Outperform call given ECW’s attractive risk reward proposition, with an RM0.75 TP pegged to an average of -1SD and mean PBV. We still believe that the Group could continue its sales momentum and offer attractive dividend yield of more than 7% at current share price.

• Pre-sales lifted by industrial segment. The Group recorded RM1.35bn sales in the 4 months for FY23, which is already higher that what it achieved in the same period of FY22 (RM1.28bn). The pre-sales secured now represents 38.5% of the Group’s FY23 sales target of RM3.5bn. We understand that its Eco Business Parks (EBP) industrial segment recorded the highest sales, contributing RM616m or 46% of total sales garnered YTD. It completed a strategic sale to the Haitian Group of 92 acres of industrial lands at EBP II in Iskandar Malaysia during the period. Meanwhile, sales of residential homes totaled RM548m in the 1st four months of FY23. Unbilled sales as at 1QFY23 stood at c.RM4.03bn.

• EWI on track to meet FY24 sale target. Separately, EcoWorld International(EWI) clinched RM335m sales plus reserves of RM189m, totaling RM524m in the first four months of FY2023, which is still on track to achieve the full year sales target of RM1.4bn. We understand that it is still focusing on selling completed stocks, which has enabled significant cash flow to be generated. In just three months, EWI’s net cash position has improved from RM172.5m as at 4QFY22 to RM 446.2m as 1QFY23 (+159% QoQ). In 1QFY23, EWI recorded a loss before tax (LBT) of RM30.3m versus a LBT of RM12.74m in 1QFY22, mainly due to foreign exchange losses of RM25.97m in the current quarter.

Source: PublicInvest Research - 24 Mar 2023