• We make no changes to our earnings forecasts, but increase our fair value to RM1.90, based on a 30% discount to its RNAV, as we make some adjustments to our RNAV calculation. Maintain BUY.

• Eco World's 1HFY17 core net profit of RM55.0mil (-0.5% YoY) came within our expectation at 52% of our full-year forecast but below consensus at 39%. Its revenue grew 17.1% YoY to RM1.26bil. There was no dividend declared, as expected.

• The growth in Eco World’s revenue was contributed by the ongoing projects including Eco Majestic, Eco Sanctuary and Eco Sky in the Klang Valley, Eco Spring, Eco Summer and Eco Business Park 1, Eco Tropics and Eco Business Park III in Iskandar Malaysia as well as Eco Meadows and Eco Terraces in Penang. However, core net earnings remained flat mainly due to a 3.5ppts lower gross profit margins at 20.4% in 1HFY17, mainly attributable to affordable products launched by Eco Botanic & Eco Majestic last year which have been included in the 2QFY17 results. This was mitigated by lower YoY selling and marketing expenses as well as lower administrative expenses in 2QFY17.

• Eco World recorded 1HFY17 new property sales of RM1.4bil. Up until end-May 2017, its total new sales from its Malaysian projects stood at RM1.71bil. This was mainly contributed by its projects in the Klang Valley (RM1.33bil), followed by its projects in Iskandar Malaysia (RM331.3mil), and the remaining RM45.4mil by its projects in Penang. The encouraging sales numbers were driven by strong momentum from the group’s mega launches in 4QFY16, namely Eco Grandeur (RM465.4mil), Eco Ardence (RM426.8mil) and Bukit Bintang City Centre (RM190.2mil). These three projects contributed 63.5% of the total current year sales up to end-May 2017.

• Eco World’s unbilled sales stood at RM4.9bil as at endMay 2017, relatively flat from end-Feb 2017. As for its 25%-associate Eco World International (EWI), Eco World’s share of EWI’s unbilled sales stood at RM1.42bil as at end-May 2017, higher than the RM1.37bil recorded as at end-Feb 2017. The strong unbilled sales should secure Eco World’s earnings visibility for the next 2-3 years.

• Eco World is launching three new projects in 2HFY17, namely Eco Forest and Eco Business Park V in the Klang Valley as well as the Eco Horizon township in Penang. With new sales contribution from this project and continued momentum from its other projects, we expect Eco World to achieve its sales target of RM4bil in Malaysia in FY17.

Source: AmInvest Research - 16 Jun 2017