KEY INVESTMENT HIGHLIGHTS

• FY19 earnings beat expectations

• Ended FY19 on a positive note

• FY19 new property sales at RM2.7b

• Earnings estimate revised upwards

• Maintain BUY with an unchanged TP of RM1.02

FY19 earnings beat expectations. Eco World Development Group (ECOWLD) FY19 core net income of RM205.9m came in above expectations, making up 120% and 115% of our and consensus full year estimates. The earnings surprise was mainly came from the strongerthan-expected revenue recognition from on-going projects and completed projects. No dividend was announced for FY19.

Ended FY19 on a positive note. ECOWLD recorded core net income of RM83.9m (+22.4%yoy) for 4QFY19, bringing cumulative earnings in FY19 to RM205.9m (+27.4%yoy). The higher earnings in FY19 can be attributed to higher revenue recognition from on-going projects and completed projects which saw its revenue inched up by 13.7%yoy. Besides, higher share of profit from joint-ventures (Eco Grandeur & Eco Business Park V, Eco Horizon, Eco Ardence and Bukit Bintang City Centre) also contributed to the higher earnings. Meanwhile, ECOWLD’s future revenue recorded RM5.2b as at October 2019.

FY19 new property sales at RM2.7b. ECOWLD recorded strong property sales of RM767m for the period between September to October 2019, mainly attributed to House Ownership Campaign. That lifts total new property sales to RM2.7b in FY19, on track to meet management 2- year new sales target of RM6b for FY19-FY20. Projects in central region of Malaysia remain the key new sales contributor at 67% followed by projects in southern region at 28%.

Earnings estimate revised upwards. We revise upwards our FY20 earnings forecast by 17% to take into account the stronger revenue recognition. We also introduce our FY21 earnings forecast. We expect earnings outlook for ECOWLD to be positive, underpinning by higher progress billing of on-going projects and higher contribution from joint venture/associate. Meanwhile, ECOWLD aims to declare its first dividend in FY20.

Maintain BUY with an unchanged TP of RM1.02. Our TP of RM1.02 premised on our RNAV discount of 55%. Valuation of ECOWLD remains attractive, trading at 48% discount to NTA per share of RM1.54 despite share price jumped by 23% in the past two days. Hence, we maintain our BUY recommendation on ECOWLD.

Source: MIDF Research - 13 Dec 2019