Eco World Development (ECW) reported a 2QFY23 net profit of RM62.7m (+37.3% YoY, +10.0% QoQ) which came in within our and consensus expectations. For 1HFY23, Group net profit of RM119.7m (+9.8% YoY) constituted c.47% and c.50% of our and consensus full year estimates. Sales momentum remains encouraging with about RM2.4bn secured in 7 months of FY23, and already at 68.5% of its sales target of RM3.5bn for the financial year. This is also already higher than the RM2.17bn recorded in the same period last year. Unbilled sales improved to RM4.29bn currently as compared to RM4.03bn in 1QFY23. Group gross and net gearing levels stand at 0.53x and 0.31x as at 2QFY23. No change to our earnings estimates. We maintain our Outperform call given ECW’s attractive risk-reward proposition, with TP of RM0.88, pegged at about 0.5x discount PBV. We still believe that the Group can continue with its sales momentum and offer attractive dividend yield of more than 6% at current share price.

• On-track to meet FY23 sales target of RM3.5bn. We understand that better-than-expected performance from commercial and industrial segments lifted the Group’s pre-sales to about RM2.4bn, or already at 68.5% of FY23 sales target. It sold industrial products worth RM838m in 7 months, which already surpassed what it achieved for the whole year in FY22. Meanwhile, total residential sales have exceeded RM1.22bn, making up 51% of year-to-date sales achieved, driven mainly by higher-priced “upgrader” homes in the Klang Valley, Iskandar Malaysia and Penang. Elsewhere, the Group’s commercial products contributed RM341m year-to date (YTD) from new launches of various retail, shop and office units at its townships.

• Eco World International (EWI) sold RM619m in 7 months, and is also on track to meet its FY23 sales target of RM1.4bn. EWI will continue to focus on selling its completed stocks which have generated substantial cash (the Group’s total cash, deposits and other investments have further increased to RM922m, or net cash of about RM652m). To recap, shareholders of EWI have approved the Group’s Proposed Capital Reduction exercise and the Group aims to declare a 1st tranche dividend of at least RM300m in the near term, and the remaining RM600m by end-2023. Separately, EWI recorded a loss before tax of RM2.12m in 2QFY23 (from pretax loss of RM66.5m in 2QFY22) mainly due to higher foreign exchange gains as the GBP strengthened against Ringgit Malaysia, higher interest income following capital contribution repayments from the UK JVs and lower finance costs as a result of the Group’s progressive repayment of loans.

Source: PublicInvest Research - 23 Jun 2023