Eco World International posts bigger 4Q loss, but manages to turn net cash positive

KUALA LUMPUR (Dec 15): Eco World International Bhd (EWI) recorded a bigger net loss of RM95.73 million for the fourth quarter ended Oct 31, 2022 (4QFY2022) from RM56.26 million a year earlier, due to further impairment on the group’s investment in EcoWorld-Ballymore in London.

This is the group's highest quarterly net loss since it was listed on the Main Market of Bursa Malaysia in 2017.

Quarterly revenue rose to RM43.15 million from RM34.75 million in 4QFY2021, thanks to a higher number of units sold and handed over to customers, EWI said in a filing.

The revenue comprises the sales proceeds from its property projects in Australia, namely West Village and Yarra One, and the fees for marketing services rendered by a subsidiary to the group’s joint venture in respect of property sales of its projects in the UK.

For FY2022 as a whole, EWI suffered a net loss of RM234.42 million compared to a net profit of RM13.57 million in FY2021. This is the group’s highest annual net loss since its listing. Annual revenue declined to RM159.96 million against RM572.71 million previously.

EWI achieved RM2.158 billion sales in FY2022, 57% higher than the sales achieved in FY2021, and 8% above its RM2 billion sales target for FY2022.

"The higher sales achieved in FY2022 has enabled the group to turn net cash positive earlier than anticipated with cash balances having exceeded total borrowings as at Oct 31," the group said.

According to EWI's financial statement, its total borrowings as of Oct 31, 2022 stood at RM482.8 million, while cash and bank balances totalled RM655.3 million.

With the net cash of RM172.5 million, EWI said sufficient funds had been set aside to fully settle the medium term notes (MTN) — the bulk of the group’s total borrowings — when they mature in May 2023.

EWI’s core business involves property development outside Malaysia. It has 19 existing and upcoming projects in the UK and Australia with a total gross development value of 4.7 billion pounds (RM25.59 billion) and A$700 million (RM2.09 billion) respectively.

In 4QFY2022, the EcoWorld-Ballymore development had a further impairment amounting to RM37.95 million. EWI explained that changes in market environment had led to a slowdown in sales, higher yield for valuation of commercial properties and higher weighted average cost of capital applied in determining the recoverable amount of its investment in EcoWorld-Ballymore.

“Going forward, a longer time period may be required to generate future sales proceeds. However, the management will steadfastly proceed to clear the inventories,” the group said.

EWI said its balance sheet strength is expected to substantially improve in FY2023.

“The board has set a sales target of RM1.4 billion for FY2023 which does not include potential contribution from new launches. With completed properties making up the bulk of the sales target, the group expects to generate cash of more than RM1 billion from the sale of such stocks," it said.

EWI added that it aims to generate an excess cash of approximately RM900 million in FY2023 after setting aside funds for the group and Eco World London's existing working capital requirements.

“Subject to achieving the sales target, the board aims to distribute excess cash in the group to shareholders in the later part of 2023, following settlement of the company’s MTN and receipt of the necessary regulatory and shareholders approvals,” it said.

EWI’s shares closed 3.9% or 1.5 sen lower at 37 sen on Thursday (Dec 15), giving the group a market capitalisation of RM876.62 million. Year to date, the stock has fallen by 13.95%.