We initiate coverage on Eco World with an Add call and implied target price of RM8.00 (ex-rights and warrants target basis of parity with RNAV). This provides investors 72% upside. Eco World is now one of our top picks in the property sector. The recently announced acquisition of landbank worth RM3.8bn is the main potential re-rating catalyst.

Transformation complete 
Since last year, SP Setia has suffered a spate of departures including several senior management figures. Together, they set up Eco World Sdn Bhd (EWSB) which went on a landbanking spree, snapping up around 3,000 acres of land throughout Malaysia. By end-2013, EWSB's holding company, together with the son of then SP Setia's CEO Tan Sri Liew Kee Sin, bought a 65% stake in Focal Aims which subsequently changed its name to Eco World. On Apr 25, Eco World announced the acquisition of EWSB's landbank for RM3.8bn as well as a 1-for-1 share split, a 1-for-2 rights issue with 4-for-5 free warrants and a 20% private placement.

A force to be reckoned with 
The enlarged Eco World will own around 4,433 acres of landbank in the Klang Valley, Johor and Penang with GDV of RM43.5bn. Since EWSB's maiden launch last Sep, it has chalked up RM1.13bn sales. Eco World is targeting new sales of RM2bn for FY10/14 and RM3bn for FY15, putting it close to that of Mah Sing and UEM Sunrise.

Exciting times ahead 
It was announced earlier this year that EWSB had won the bid to develop 470 acres of land in Batu Kawan, Penang, while more recently Eco World acquired 309 acres of land in Canal City, Selangor. We believe there are many landbanking opportunities domestically and internationally as the group is in a hurry to grow and to challenge the existing market leaders. Tan Sri Liew joined Eco World's board on May 5 as a non-independent and non-executive director and he brings with him the credibility and track record that made SP Setia Malaysia's best and most admired developer.

Source: CIMB Daybreak - 12 May 2014, Full PDF Report