• Private placement raised RM770m proceeds

• Listing of Eco World International by March 2017 to propel earnings growth from FY18 onwards

• Maintain BUY and RM1.80 TP

What’s New

Eco World announced that the third tranche of its private placement of up to 591.07m of new shares (first announced in April 2016) has been completed. The third tranche of the private placement comprising 147.7m new shares takes the total issued placement shares to 580.1m under three separate tranches, raising total cash proceeds of RM770m or RM1.33/share.

Management has indicated its intention to utilise c.50% of the proceeds to finance the proposed subscription of a 27% stake in Eco World International which is slated for a listing on Bursa Malaysia by March 2017. Based on the indicative offer price of RM1.20, Eco World would have to fork out RM778m to subscribe for its 27% stake.

There is no change in our EPS as we have already imputed the dilution impact from the private placement. We maintain our TP of RM1.80, based on a 20% discount to our RNAV. We believe Eco World deserves to trade at a lower discount relative to its peers given its prominence as the bellwether of the Malaysian property sector with ongoing outperformance in a weak market. We continue to like Eco World for the proven and impeccable track record of its key senior executives, who have helped the developer to establish strong brand recognition among property buyers.

Source: Alliance Research - 7 Mar 2017