KEY INVESTMENT HIGHLIGHTS

• 9MFY19 earnings within expectations

• Earnings for the period lifted by greater progress

• 3QFY19 CNI surged 81.5%yoy to RM50.5m

• 10MFY19 new property sales at RM1.9b

• Maintain BUY with an unchanged TP of RM1.02

9MFY19 earnings within expectations. Eco World Development Group (ECOWLD) 9MFY19 core net income (CNI) of RM122.0m was inline with our full year estimate at 71% and broadly within consensus’ at 68%.

Earnings for the period lifted by greater progress. For 9MFY19, CNI jumped 47.8%yoy to RM122.0m while revenue improved by 2.1%yoy to RM1555.8m. The higher earnings can be attributed to more substantial share of profit from joint-ventures that were recognized during the period. Locally, Eco Grandeur & Eco Business Park V, Eco Horizon, Eco Ardence and Bukit Bintang City Centre (BBCC) contributed RM538.7m effectively. On the other hand, EcoWorld international turned from a net loss of RM23.2m last year to a profit of RM68.7m this year. Based on the group’s stake of 27%, it contributed RM18.5m to the group’s bottomline. Meanwhile, ECOWLD’s future revenue recorded RM5.9b as at August 2019.

3QFY19 CNI surged 81.5%yoy to RM50.5m as revenue increased by 14.7%yoy to RM521.4m. The better on-year performance can be attributed to higher percentage of project completion at its various developments, namely Eco Majestic, Eco Forest, Eco Sanctuary and Eco Sky in the Klang Valley; Eco Botanic, Eco Spring, Eco Summer, Eco Business Park I, II and III as well as Eco Tropics in Johor. In Penang, earnings were contributed by Eco Meadows and Eco Terraces. As for its international joint-venture, EcoWorld International results grew by close to 4.5 times during the quarter due to the completion and handover of units at EcoWorld Ballymore and EcoWorld London’s Built-to-Rent.

10MFY19 new property sales at RM1.9b. ECOWLD’s new property sales accelerated further to RM1.9b during the period compared to RM1.03b in 7MFY19. Top new sales contributor during the period include Eco Business Park V (RM297.6m), Eco Majestic (RM251.4m) and Eco Ardence (RM232.9m). In 4QFY19, the company targets to launch Cora at Eco Ardence, Regent Gardens at Eco Grandeur, Hazelton at Eco Forest, Mellowood at Eco Majestic, Brydon at Eco Horizon and Rose at Eco Spring. Its 2-year new sales target of RM6b is maintained.

Maintain BUY with an unchanged TP of RM1.02. We maintain our earnings forecasts as the latest results are in-line. Our TP of RM1.02 premised on RNAV discount of 55%. We keep our BUY recommendation on ECOWLD as valuation is attractive at 57% discount to latest book value of RM1.50 per share while its robust new sales pipeline provides earnings visibility.

Source: MIDF Research - 20 Sept 2019