KEY INVESTMENT HIGHLIGHTS

• BBCC enters en bloc JV with Mitsui Fudosan Asia

• The deal affirms prospect of BBCC

• No changes to near-term earnings forecast

• Maintain BUY with an unchanged TP of RM0.73

BBCC enters en bloc JV agreement with Mitsui Fudosan Asia. Eco World Development Group (ECOWLD) announced that Mitsui Fudosan (Asia) Malaysia Sdn Bhd (MFAM) and BBCC Development Sdn Bhd (BBCCD) have entered into a joint venture (JV) agreement to form a JV company known as MFBBCC Serviced Suites Sdn Bhd (MFBBCC) to acquire a serviced residence block in the Bukit Bintang City Centre (BBCC) development for RM242m. MFBBCC will be 51% held by MFAM and 49% by BBCCD. MFBBCC will manage and operate the property including granting of tenancies within the property

Details on the serviced residence block. The serviced residence block is part of Phase 2 of BBCC which will also include another residential tower and two blocks of commercial buildings. Note that BBCC is a JV project between ECOWLD, the Employee Provident Fund Board, and UDA Holdings Berhad. The serviced residence block is a 44- storey buildings that will have a total of 269 units with built-ups from 532 sq ft to 1188 sq ft. Level 2 to 4 of the serviced apartment will house the carparks and facilities such as swimming pool, yoga deck, gym, library, children play area, business centre and multi-purpose room.

The deal affirms prospect of BBCC. We view the en bloc deal positively as it helps to improve the prospect of BBCC and unlock the value of BBCC. The serviced apartment which is part of Phase 2 of BBCC is expected to completed by the end of 2023. Meanwhile, Phase 1 of BBCC is underway and set for first handover in the first quarter of 2021. The en bloc deal follows the partnership between MFAM and BBCCD on the Mitsui Shopping Park Lalaport retail mall project in Phase 1 of BBCC. We think that the partnership with Mitsui Fudosan Asia will help to assure the continued success of the BBCC development.

Maintain BUY with an unchanged TP of RM0.73. We expect limited near-term earnings impact from the en-bloc sale as the serviced apartment is expected to be completed by the end of 2023. Hence, we make no changes to our earnings forecast for FY20/21F. We also maintain BUY call of ECOWLD with unchanged TP of RM0.73, based on 68% discount to RNAV. Valuation of ECOWLD remains attractive, trading at 65% discount to its NTA per share of RM1.50.

Source: MIDF Research - 11 Jun 2020