INVESTMENT HIGHLIGHTS

• FY17 earnings in line

• Achieved sales target in FY17.

• Targeting FY18 sales of RM3.5b.

• Earnings estimate reduced slightly

• Maintain NEUTRAL with lower TP of RM1.60

FY17 earnings within expectation. Eco World Development Group (ECOWLD) FY17 core net income (CNI) of RM113.1m is within expectation. It makes up 99% of ours and 93% of consensus estimate. Our CNI excludes the one off gain of RM96.6m arising from dilution of equity interest (mainly from Paragon Pinnacle which is the Company that owns the Ijok landbank).

Achieved sales target in FY17. ECOWLD achieved RM4.01b sales in FY17 and met their target of RM4.0b for the year. The 4QFY17 sales were strong at RM1.83b of sales due to the success of its “EcoWorld DNA” campaign which focus on the best elements of Design, Nature & Art. Five projects were concurrently launched out of which three are maiden launches and two new phases within existing townships. The maiden launches are Eco Horizon in Penang, Eco Forest in Semenyih and Eco Business Park V at Ijok, Selangor. The two new phases are Dremien@Eco Ardence in Shah Alam and Whitten@Eco Majestic City in Semenyih.

Targeting FY18 sales of RM3.5b. ECOWLD is targeting RM3.5b sales in FY18. While this is below our initial estimate, we understand that this is mainly caused by the absence of major launches in FY18. The strategy in FY18 is geared towards enhancing the value of its existing landbank with the aim of delivering sustainable long-term growth for all stakeholders.

Earnings estimate reduced slightly. We trimmed our FY18 CNI estimate by 5% to RM191m after imputing lower sales target for FY18 and FY19. Unbilled sales of RM6.4b reflect 2.2years of earnings visibility.

Maintain NEUTRAL with lower TP of RM1.60. Previous TP is RM1.70. We have widened our discount to RNAV to 30% (from 25%) to reflect the lower sales target going ahead.

Source: MIDF Research - 18 Dec 2017