INVESTMENT HIGHLIGHTS

• 9MFY18 earnings deemed within expectations

• Higher cumulative earnings in 9MFY18

• Strong property sales in 3QFY18

• Maintain BUY with an unchanged TP of RM1.48

9MFY18 earnings deemed within expectations. Eco World Development Group (ECOWLD) 9MFY18 core net income of RM98.7m is deemed as within expectations despite it makes up only 61% and 57% of our and consensus full year estimates respectively as we expect a stronger 4Q performance.

Higher cumulative earnings in 9MFY18. ECOWLD registered core net income of RM38.3m in 3QFY18, growing 10.9%qoq. The stronger sequential earnings were due to higher contribution from JV and EcoWorld International Berhad (EWI). That brought cumulative earnings to RM98.7m in 9MFY18, increasing 21.3%yoy. The earnings growth in 9MFY18 was mainly underpinned by lower expenses and higher contribution from JV projects (Bukit Bintang City Centre, Eco Grandeur and Eco Ardence) and EWI. Meanwhile, unbilled sales of RM4.5b provide less than 2 years of earnings visibility. Looking forward, we expect 4QFY18 earnings to be stronger due to better contribution from JV and EWI.

Strong property sales in 3QFY18. ECOWLD recorded strong new property sales of RM1.08b in 3QFY18 against new sales of RM423m in 2QFY18. The strong sales in 3QFY18 were driven by its #OnlyEcoWorld Campaign and EcoWorld Help2Own financing package. Cumulative new sales of RM2b for 9MFY18 makes up 57% of management new sales target of RM3.5b. Management is maintaining its new sales target of RM3.5b.

Maintain BUY with an unchanged TP of RM1.48. We make no changes to our earnings forecasts for FY18/19. Our TP for ECOWLD is also unchanged at RM1.48, based on 35% discount to RNAV. We maintain our BUY recommendation on ECOWLD as valuation of ECOWLD remains attractive at a 20% discount to its latest book value of RM1.47 per share. Meanwhile, outlook for earnings and new property sales are also stable.

Source: MIDF Research - 21 Sept 2018