KEY INVESTMENT HIGHLIGHTS

• Landbank expansion in Semenyih
• Eco Forest 2 township on the new land
• Higher net gearing
• Earnings forecast maintained
• Maintain NEUTRAL with a revised TP of RM1.84

Landbank expansion in Semenyih. Eco World Development Group (Eco World) announced that its 81%-owned subsidiary, Mutiara Balau Sdn Bhd) had on 6th November 2024 entered into two conditional sale and purchase agreements for the acquisitions of 847 acres of freehold land in Semenyih for total cash consideration of RM742.4m. Eco World will hold 81% stake in the project development on the land while the balance 19% will be owned by Boustead Properties Berhad. The land acquisition is expected to be completed in 1HCY25.

Eco Forest 2 township on the new land. We view the land acquisition positively as it will increase the Eco World landbank in Semenyih. Note that the new land is located next to its Eco Forest township in Semenyih. The township was launched in 2017, catering to first-time homebuyers.

Meanwhile, the township has an undeveloped landbank of 136 acres and hence the acquisition will allow Eco World to replenish its landbank in Semenyih and to further ride on the growing demand for landed house by first-time homebuyers or upgraders. The development on the new land, to be named Eco Forest 2, has an estimated GDV of RM4.6b. That translates into land cost to GDV ratio of 16% which we deem attractive.

Meanwhile, land acquisition price of RM20psf is slightly higher than RM18psf paid by Mah Sing Group for the acquisition of 500 acres of land in Semenyih back in June 2023.

Higher net gearing. Eco World intends to fund the land acquisitions through a combination of internal funds and bank borrowings. We estimate net gearing of Eco World to increase to 0.36x from 0.21x in 3QFY24.

Maintain NEUTRAL with a revised TP of RM1.84. We make no changes to our earnings forecast for FY24F/25F/26F. We revise our TP for Eco World to RM1.84 from RM1.81 as we update our RNAV valuation and include RNAV contribution from Eco Forest 2. Our TP is based on unchanged 22% discount to RNAV. New sales outlook for Eco World is expected to remain stable with growing contribution from duduk apartments and industrial properties. Nevertheless, upside is limited and hence we maintain our NEUTRAL call on Eco World. Valuation of Eco World is fair at this level, trading above its latest NTA of RM1.66 per share.

Source: MIDF Research - 8 Nov 2024