• The undisputed industry leader. ECWLD’s brand spreads across three key economic regions in Malaysia, namely Klang Valley, Iskandar Malaysia and Penang with 18 development projects in total that include new townships, integrated commercial developments, luxury high-rise apartments and green business parks. The Group presently has approximately 8,053 acres of landbank with a total gross development value (GDV) of RM87.5bn. Through Eco World International (to be listed in 1Q17), the brand has also extended its reach to London, United Kingdom and Sydney, Australia.

• After booking RM3.2bn and RM3.02bn sales in FY14 and FY15, ECWLD is targeting RM4bn sales in FY16, which will be anchored by 11 ongoing projects, newly launched Bukit Bintang City Centre (holding a 40% stake) as well as its proportionate share of sales from its proposed 30% (maximum scenario) stake in Eco World International.

• Explosive growth ahead. Consensus is projecting an explosive FY16-18 earnings CAGR of 48%, spurred by its all-time high unbilled sales of RM4.72bn as at end-Aug 16 which will underpin earnings up to FY19. In anticipation of better cashflow with the hand-over of completed units as well as the completion of a proposed private placement by end-16, ECW’s balance sheet is expected to remain healthy and accommodative for its aggressive expansion plans.

• To recap, ECWLD is proceeding with its proposed private placement (indicative price of RM1.30) of 591m shares (with major sharehodlers are committed to undertake up to a maxumum of 95% of the placement shares in the event of allocation for 3rd party/institutinal investors is undersubscribed) with hal f (RM389m) of the proceeds (RM768m) will go towards paying for the EWI subscription.

• Bottoming up. The stock has been trading within its upward channel from the RM1.20 low. With prices trading above major SMAs, higher prices are likely in the short term as technical indicators are on the mend. We expect prices to break above the RM1.40 (19 Oct high) levels and head higher towards its upper channel line near RM1.46, before reaching our LT objective at RM1.56 (76.4% FR) Key supports are RM1.30 (100 -d SMA and the placement price) and RM1.26 (20 Sep low). Cut loss at RM1.25.

Source: Hong Leong Investment Bank Research - 28 Oct 2016