INVESTMENT HIGHLIGHTS

• JV with EPF to develop Batu Kawan land

• To be developed into Eco Horizon and Eco Sun

• Positive on the news

• Maintain BUY with TP of RM1.68

JV with EPF to develop Batu Kawan land. Eco World Development Group (ECOWLD) is teaming with Employee Provident Fund Board (EPF) to jointly develop its 375 acres of leasehold land in Batu Kawan, Penang. The JV structure between ECOWLD:EPF will be 60:40 with EPF subscribing to 40% stake in Eco Horizon Sdn. Bhd. (EHSB). In addition, ECOWLD/EPF will provide up to RM140m/RM260m of shareholders advances to EHSB. Note that EHSB is the Company which holds the land title of the two pieces of land in Batu Kawan, Penang. Target completion date for the deal is 1H2017.

To be developed into Eco Horizon and Eco Sun. Recall that on 28- Jun-2016, EHSB acquired 375 acres of land in Batu Kawan Penang for RM875m. Estimated GDV for both development projects are estimated at RM7.76b. We gather that Eco Horizon will be developed over a period of ten years and Eco Sun over a period of seven years.

Positive on the news. We are positive on the news as EPF subscription into EHSB will reduce ECOWLD’s capital commitment on the project. Hence, ECOWLD FY17 net gearing should remain manageable.

Maintain BUY with TP of RM1.68. Pending the completion of the deal, we maintain our earnings forecast for both FY17 and FY18. Our TP of RM1.68 is based on Price-to-RNAV (PRNAV) of 0.75x reflecting +0.5SD valuation above mean. We continue to like ECOWLD for its excellent sales achievement, superior earnings growth prospects and strong branding.

Source: MIDF Research - 24 Jan 2017