Expectation-wise, 9MFY21 CNP of RM140m is within ours but below consensus which may have underestimated the impact of the FMCO lockdowns and 60% workforce operation restriction. 10MFY21 sales of RM3.1b (for ECOWLD) and RM1.3b (for EWINT) are also within our full year target of RM3.2b and RM1.5b, respectively. Given the strong share price performance (+22%) since our upgrade last quarter, we downgrade ECOWLD to MP (from OP) on unchanged TP of RM0.85 as we find the share price fairly valued for now.

Within our but below street’s expectations. 3QFY21 CNP of RM35.1m brought 9MFY21 CNP to RM140m, accounting for 77%/69% of our/consensus full-year estimates. This is within our, but below consensus, expectation, as they may have underestimated the FMCO impact coupled with 60% workforce cap at construction sites. No dividends were declared as expected.

Sales within our target. In the three months from Jun – Aug 2021, ECOWLD raked in sales of RM0.58b, bringing 10MFY21 to RM3.1b – within our RM3.2b target (which we upgraded last quarter post 2QFY21 results) but surpassed management’s internal target of RM2.875b. Management did not provide a new target for the remainder of the year. Unbilled sales stood at RM4.1b as of 3QFY21.

EWINT’s 10MFY21 sales of RM1.3b is also within our RM1.5b target but lagged management’s internal target of RM2.2b as foreign demand remained weak due to the restriction in air travels.

Highlights. 3QFY21 CNP of RM35.1m came off 17% QoQ mainly due to lower contribution from their local JV projects (-68%) in which construction was impacted by the FMCO lockdowns. Such impact was less obvious for their subsidiary projects as a sizeable number of completed and near-completed properties were sold during the period – enabling immediate recognition of earnings which supported its gross profit line. YoY, 9MFY21 CNP of RM139.9m increased marginally by 2% on stronger JV contributions from its local (+35%) and international front (+104%).

Vaccination update. ECOWLD had initiated a vaccination drive in June 2021 to have all eligible staff and contractors vaccinated. This explains their higher administrative costs this quarter (+12% QoQ, +13% YoY). As of mid-September, all ECOWLD's staff are fully vaccinated while their contractors are >80% vaccinated with works expected to resume at 100% capacity after mid-September.

Keep FY21-22E earnings unchanged post results.

Downgrading to Market Perform. Since our upgrade last quarter, ECOWLD’s share price has appreciated 22%. Being in a sector faced with multiple macro issues which impedes sustainable earnings visibility, we find further upside rerating capped at this juncture. Consequently, we downgrade ECOWLD to MP (from OP) with an unchanged TP of RM0.85 pegged to 0.51x FY22E PBV (-0.5SD below mean). Note that the -0.5SD ascribed to ECOWLD is the highest in our coverage while the rest ranges from -2.0SD to -1.0SD.

Source: Kenanga Research - 20 Sept 2021