Eco World Development (ECW) announced that it had entered into a conditional sale and purchase agreement with IOI Prima Property Sdn Bhd to acquire 403.78 acres of land located in Johor for RM211.1m. We understand that the Group plans to develop the land into a business park to be known as Eco Business Park VI (EBP VI) with an estimated gross development value (GDV) of RM1.58bn. The land, which is costing the Group about 13.4% of the projected GDV, appears to be fair in our view. With the new industrial land, the Group will also have a combined five sizeable industrial parks, comprising four in Iskandar Malaysia (EBP 1, II, III & VI) and one in Selangor (EBP V), which will increase its industrial landbank from 1,647 acres to 2,416 acres. We keep our earnings unchanged for now pending launch details. Recent strong price performance has seen ECW’s stock price rise to about 0.6x price to NTA, vis-à-vis average sector discount of about 0.5x. Hence, we believe it is fair valued for now and downgrade our Outperform call to Neutral, with unchanged TP of RM0.88, pegged to ~0.5x PBV.

• Landbank details. The 404-acre land is located in Mukim Senai, Daerah Kulai, Johor and is said to be strategically located, easily accessible through the North-South Highway (situated 5 km from the Kulai Toll) and enjoys good connectivity to the Second-Link Expressway, Senai-Desaru Highway, Pasir Gudang Highway, Senai International Airport and various sea ports.

• Earmarked for RM1.58bn Eco Business Park VI. The Group plans to develop the newly-acquired land as Eco Business Park VI, which will be the fifth project under its industrial segment. The main targeted segment will be medium and light industrial businesses, which will be able to have access to ECW’s one-stop industrial solutions providing modern facilities and comprehensive services to assist the business owners in setting up their operations quickly and seamlessly. We are positive with the new landbank as it will help the Group to expedite growth of its industrial portfolio. To note, the Group has been enjoying brisk sales for the industrial segment which has seen exponential growth with a 3-year CAGR of 51% recorded from FY20–FY22. YTD FY23, the Group has already sold industrial products worth some RM838m (or 111% of FY22 full year sales of RM753m).

Source: PublicInvest Research - 7 Sept 2023