1QFY22 CNP of RM63.4m was well within expectations. 4MFY22 sales of RM1.28b are deemed in-line with our RM3.3b target (at 38%) as we anticipate weaker sales ahead on mounting headwinds from anticipated increase in interest rates and the absence of HOC. Also, most launches for the year were already done in 1QFY22. Meanwhile, EWINT’s 4MFY22 sales are above our RM1.5b target as EWINT has been providing higher incentives to drive sales – compromising margins along the way. Hence, despite raising EWINT’s sales assumption to RM2.0b (from RM1.5b), we keep FY22-23E earnings unchanged. Maintain MP and TP of RM0.85 pegged to 0.51x PBV.

Within expectations. 1QFY22 CNP of RM63.4m came within our/consensus expectations at 27%/28% of full-year estimates. No dividends as expected as ECOWLD typically declares dividends in 2Q and 4Q.

4MFY22 sales of RM1.275b (3MFY22 was RM1.09b) are deemed within our/management’s RM3.3b/RM3.5b sales target (at 38%/36%) as we anticipate weaker sales ahead for the rest of the year as headwinds arise from anticipated interest rate hikes in 2HCY22 and the absence of HOC. Note that ECOWLD’s management guided that most of their launches has been made in 1QFY22 with less launches left for the remainder of the year.

Meanwhile, EWINT’s 4MFY22 sales of RM0.685b (3MFY22 sales was RM0.428b) is within management’s RM2.0b target but above our RM1.5b target as further incentives were provided to boost sales – which means margins will be compromised. To break down EWINT’s sales further, RM0.535b (or 78% of its 4M22 sales) came from EW Ballymore (EWINT’s 75% JV) which commands low GP margins due to the aggressive push for sales. Nonetheless, we raise our FY22 EWINT sales to RM2.0b – in line with management.

Highlights. 1QFY22 CNP of RM63.4m came off 37% QoQ mainly due to lower revenue (-20%) with weaker GP margins of 21% (-3ppt) due to higher cost savings recognised in 4QFY21 for completed projects arising from prudent recognition prior.

YoY, 1QFY22 CNP was only marginally up by 1% despite higher revenue (+5%) and better GP margins (+1ppt) due to RM1.6m losses incurred at its international JV (aka EWINT) vs. a RM21.9m international JV profit in 1QFY21. EWINT incurred a marginal loss during the quarter due to much lower handover from Australia (Yarra One, West Village) and UK (EW Ballymore and EW London). Note that revenue and profit recognition for EWINT are only recognised upon handover.

Maintain FY22-23E earnings despite higher sales assumption from EWINT (to RM2.0b from RM1.5b) as the aggressive drive for sales by EW Ballymore (EWINT’s 75% JV) would likely translate to minimal GP margins – and consequently breakeven bottom-line in our opinion.

Maintain Market Perform on 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 spectrum of - 2.0SD to -0.5SD.

Source: Kenanga Research - 18 Mar 2022