INVESTMENT HIGHLIGHTS

• FY18 earnings within expectations

• Strong earnings in 4QFY18

• New property sales of RM3.1b

• Maintain BUY with an unchanged TP of RM1.48

FY18 earnings within expectations. Eco World Development Group (ECOWLD) FY18 core net income of RM167.2m came in within expectations, making up 103% and 104% of our and consensus full year estimates respectively.

Strong earnings in 4QFY18. On sequential basis, 4QFY18 core net income was higher at RM68.5m (+78.8%qoq), mainly due to higher sales achieved in 4QFY18 following the success of ECOWLD’s #OnlyEcoWorld Campaign. The higher sequential earnings were also driven by higher contribution from joint ventures (+104%qoq). That brought cumulative earnings in FY18 to RM167.2m (+47.8%yoy). The higher earnings in FY18 were mainly contributed by lower selling and marketing expenses (-55.8%yoy), lower administrative expenses (- 17.6%yoy) and higher contribution from joint ventures (Eco Grandeur, Eco Horizon, Eco Ardence and Bukit Bintang City Centre). Meanwhile, unbilled sales of RM4.6b provide 2 years of earnings visibility.

New property sales of RM3.1b. ECOWLD recorded new property sales of RM1.11b in 4QFY18, higher than new property sales of RM1.08b in 3QFY18. The strong sales in 4QFY18 were driven by #OnlyEco World Campaign and EcoWorld Help2Own financing package. That brought total new sales to RM3.1b in FY18 which is slightly below management new sales target of RM3.5b. Looking ahead, ECOWLD targets to achieve total new sales of RM6b over the next two years.

Maintain BUY with an unchanged TP of RM1.48. We fine-tuned our earnings forecast for FY19 by +7% post release of FY18 figures. We also introduce our FY20 earnings forecast. Our TP is maintained at RM1.48, based on 35% discount to RNAV. Nevertheless, we maintain our BUY recommendation on ECOWLD as valuation of ECOWLD remains attractive at 35% discount to latest book value of RM1.50 per share. Besides, earnings outlook for FY19 is expected to be supported by higher contribution from joint ventures and EWI.

Source: MIDF Research - 14 Dec 2018