• 1QFY17 earnings within expectation

• Revenue grew by 28%yoy to RM593m

• FY17 Gross Sales target of RM4.0b is on track

• Earnings estimate increased

• Maintain BUY with higher Target Price of RM1.80

1QFY17 earnings within expectation. Eco World Development Group (ECOWLD) 1QFY17 Net Income of RM116.2m is within expectation at 51% /68% of our/consensus full year forecast. 1Q profit is exceptionally strong due to RM94.8m gain arising from dilution of equity interest in Paragon Pinnacle (the Company which owns the Ijok landbank). Hence, we expect the remaining quarters profit to normalize. No dividend is declared and this is within expectation as the Company is still in high growth stage.

Revenue grew by 28%yoy to RM593m. The strong revenue growth is due to ongoing recognition of projects in the Klang Valley (Eco Majestic, Eco Sanctuary and Eco Sky), Iskandar Malaysia (Eco Botanic, Eco Spring, Eco Summer, Eco Business Park 1, Eco Tropics and Eco Business Park III) and Penang (Eco Meadows and Eco Terraces).

FY17 Gross Sales target of RM4.0b is on track. For 4MFY17, ECOWLD secured sales of RM955m (or 24% of full year target). We maintain our sales estimate of RM4.0b for Malaysian projects as we expect sales to pick up in the remaining 8 months. Note that ECOWLD plans to launch Eco Horizon at Batu Kawan, Penang and Eco Forest at Semenyih, Selangor in the second half of the year.

Earnings estimate increased. FY17 earnings saw an increased by 34% to RM185m. We have included: i) RM94.8m gain arising from dilution of equity interest in Paragon Pinnacle, ii) estimated loss contribution from EcoWorld International (EWI) as profit is only expected from FY18 onwards (due to UK and Australia’s profit recognition on completion basis) and iii) start-up losses at multiple JVs. Unbilled sales of RM6.33b reflects 2.5years of earnings visibility.

Maintain BUY with higher Target Price of RM1.80. Our RNAV value has been increased as we have included: i) 27% stake in EWI, ii) Batu Kawan Penang land and iii) adjusted stake in Ijok land. Valuation method is unchanged by using Price-to-RNAV (PRNAV) of 0.75x reflecting 0.5SD valuation above mean. We continue to like ECOWLD for its excellent sales achievement and strong branding

Source: MIDF Research - 17 Mar 2017