INVESTMENT HIGHLIGHTS

• 1QFY19 earnings deemed within expectations

• Earnings driven by contribution from JV

• New property sales at RM230m in 4MFY19

• Earnings forecasts maintained

• Maintain BUY with an unchanged TP of RM1.25

1QFY19 earnings deemed within expectations. Eco World Development Group (ECOWLD) 1QFY19 core net income of RM30.3m is deemed as within expectations despite accounting for only 17% and 15% of our and consensus full year estimates respectively as we expect earnings in the coming quarters to be stronger.

Earnings driven by contribution from JV. 1QFY19 core net income was higher at RM30.3m (+163.9%yoy), mainly due to higher contribution from joint ventures and positive contribution from associate. Note that joint ventures namely Eco Grandeur, Eco Horizon, Eco Ardence, Bukit Bintang City Centre (BBCC) and Eco World International Berhad (EWI) recorded positive contribution of RM24m in 1QFY19 against losses from JV of RM3m in 1QFY18. Meanwhile, ECOWLD has future revenue amounting to RM6.08b as at February 2018, providing earnings visibility for FY19/20.

New property sales at RM230m in 4MFY19. ECOWLD recorded slow new sales of RM230m in first four months of FY19 as buyers hold back purchases following the announcement of the National Home Ownership Campaign in November 2018. Nevertheless, management remains confident that it will able to meet its 2-year new sales target of RM6b. Recently, ECOWLD unveiled its latest marketing campaign – HOPE (Home Ownership Programme with EcoWorld) to drive its new sales.

Maintain BUY with an unchanged TP of RM1.25. We maintain our earnings forecasts for FY19F/20F. Our TP is maintained at RM1.25, based on 45% discount to RNAV. We maintain our BUY recommendation on ECOWLD as valuation of ECOWLD is attractive at 39% discount to its latest book value of RM1.48 per share. Besides, we expect stronger earnings in FY19 on the back of higher contribution from local joint ventures and EWI.

Source: MIDF Research - 29 Mar 2019