Eco World Development’s (ECW) 3QFY23 net profit came in at RM66.3m (+43.0% YoY, +16.4% QoQ), within our and consensus expectations. YTD, the Group reported net profit of RM186.0m (+19.7% YoY) which constituted c.72% and c.74% of respective full year estimates. Group pre-sales of about RM3.1bn was secured in 10 months, and on track to hit its FY23 sales target of RM3.5bn. Unbilled sales stood at RM4.22bn as at 31 August 2023, down slightly from RM4.29bn in 2QFY23. As at 31 July 2023, gross and net gearing levels are 0.51x and 0.31x, respectively, with bank borrowings reduced to RM2.5bn (from RM2.8bn in 1QFY23). All told, no change to our earnings estimates. 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 fairly-valued for now as we maintain our Neutral call, with unchanged TP of RM0.88, pegged to ~0.5x PBV.

• Sold RM3.1bn in 10 months, or 87.4% of FY23 sales target of RM3.5bn. Group sales remain encouraging as its industrial products performed better than expected YTD. We understand that Eco Business Parks (EBPs) segment achieved record-breaking RM997m sales in 10 months, or already 132.4% of its FY22 full year industrial sales and almost one-third of the Group’s year-to-date sales. Meanwhile, sales of residential homes have exceeded RM1.63bn as at 31 August 2023, or 53.3% of total sales achieved to-date. Elsewhere, commercial products achieved RM432m sales in 10 months, close to FY22 full year commercial sales of RM446m, mainly contributed by shop and office units launched during the year within its existing matured townships.

• Eco World International (EWI) sold RM1bn in 10 months, plus reserves of RM157m, adding up to a total of RM1.161bn which keeps it largely on track to achieve the sales target of RM1.4bn for FY23. Embassy Gardens, which generated RM525m sales, was the biggest contributor to sales, followed by Wardian (RM172m), London City Island (RM109m) and Yarra One (RM64m). We understand that EWI and its joint ventures have approximately RM1.1bn of completed and nearly-completed stocks that are available for sale, of which the Group’s effective share of these stocks are c.RM80m. As at 31 July 2023, EWI had net cash of RM801m (RM831m if inclusive of the Group’s effective share at JV entities). It also declared a dividend amounting to RM792m, which will be paid to shareholders on 29th September 2023 following the completion of its capital reduction exercise.

Source: PublicInvest Research - 22 Sept 2023