INVESTMENT HIGHLIGHTS

• 1HFY18 earnings deemed within expectations

• Expect stronger 2HFY18

• 1HFY18 new sales at RM923m

• Maintain BUY with an unchanged TP of RM1.48

1HFY18 earnings deemed within expectations. Eco World Development Group (ECOWLD) 1HFY18 core net income of RM60.4m deemed within expectations despite it makes up 37% and 34% of our and consensus full year estimates as earnings in 2HFY18 is expected to be stronger.

Expect stronger 2HFY18. ECOWLD recorded core net income of RM34.6m in 2QFY18 (+2.4%yoy), bringing cumulative core net income to RM60.4m (+9.3%yoy) in 1HFY18. The earnings growth in 1HFY18 was driven by lower selling and marketing as well as administrative expenses which has more than offset the higher finance costs. Besides, higher contribution from JV projects (Bukit Bintang City Centre, Eco Grandeur and Eco Ardence) also contributed to the earnings growth. Looking forward, earnings in 2HFY18 are expected to be stronger due to increasing contribution from JV while contribution from EcoWorld International Berhad (EWI) is expected to be positive in 2HFY18. Meanwhile, unbilled sales of RM5.9b provide 2 years of earnings visibility.

1HFY18 new sales at RM923m. ECOWLD registered new sales of RM423m in 2QFY18, lower than new sales of RM500m in 1QFY18. Buying interest was slightly weaker in 2QFY18 due to uncertainties on the outcome of GE14. New sales in 1HFY18 make up 26% of management new sales target of RM3.5b. Nevertheless, ECOWLD received encouraging response to its newly launched #OnlyEcoWorld Campaign and EcoWorld Help2Own financing package which is expected to catch up on ECOWLD sales target of RM3.5b.

Maintain BUY with an unchanged TP of RM1.48, based on 35% discount to RNAV. We also maintain our earnings forecast for FY18/19 as we expect earnings in 2HFY18 to be stronger on the back of higher contribution from JV and EWI. Valuation of ECOWLD remains attractive, trading at 17% discount to latest book value of RM1.46 per share. Hence, we are maintaining our BUY recommendation on ECOWLD.

Source: MIDF Research - 29 Jun 2018