• 1HFY17 earnings within expectation

• Revenue grew by 17%yoy to RM1.26b

• Sales growth of 30% yoy in the 7MFY17

• Earnings estimate maintained

• Maintain BUY with Target Price of RM1.80

1HFY17 earnings within expectation. Eco World Development Group (ECOWLD) 1HFY17 Net Income of RM149.8m is within expectation at 81%/97% of our/consensus full year forecast. The first half profit is exceptionally strong due to the 1QFY17’s 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 17%yoy to RM1.26b. The strong revenue growth is due to ongoing recognition of projects in the Klang Valley (Eco Sanctuary and Eco Sky), Iskandar Malaysia (Eco Spring, Eco Summer, Eco Business Park 1, Eco Tropics and Eco Business Park III) and Penang (Eco Meadows and Eco Terraces).

Sales growth of 30% yoy in the 7MFY17. For 7MFY17, ECOWLD secured sales of RM1.71b (or 43% of full year target). Against similar period last year, this represents a strong 30% sales growth. We maintain our sales estimate of RM4.0b for Malaysian projects as ECOWLD plans to launch three projects in the 2HFY17. These include: i) Eco Forest at Semenyih, Selangor, ii) Eco Business Park V at Ijok, Selangor and iii) Eco Horizon at Batu Kawan, Penang.

Earnings estimate maintained. FY17 net income estimate is maintained at RM185m. We also maintain our FY18 net income estimate of RM258m. Unbilled sales of RM6.32b reflects 2.5years of earnings visibility.

Maintain BUY with Target Price of RM1.80. 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 - 16 Jun 2017