KEY INVESTMENT HIGHLIGHTS

• FY24 earnings above expectations
• Ended FY24 on a stronger note
• Strong new sales of RM4.07b in FY24
• Earnings forecast revised upwards
• Maintain NEUTRAL with a revised TP of RM2.01

FY24 earnings above expectations. Eco World Development Group (Eco World) FY24 core net earnings of RM354.2m came in above expectations, making up 118% and 121% of our and consensus estimates respectively. The positive deviation was mainly due to the higher-than-expected progress billing in 4QFY24. Meanwhile, Eco World announced dividend of 2sen per share, bringing total dividend payout to 6sen per share which translates into dividend yield of 3%.

Ended FY24 on a stronger note. On a sequential basis, 4QFY24 core net income increased to RM122.3m (+37.1%qoq) while topline was higher (+21.3%qoq). The improved earnings were driven by higher progress billing at project sites which lifted contribution from joint ventures. On a yearly basis, 4QFY24 core net income was higher (+38.1%yoy), bringing FY24 core net income higher at RM354.2m (+29.7%). The earnings growth was supported by higher earnings recognition from ongoing projects which include newly launched projects and on-going duduk projects. Besides, Eco World also realized cost savings from closure of accounts on projects which lifted earnings in FY24. On a separate note, net gearing of Eco World improved to 0.19x in 4QFY24 from 0.21x in 3QFY24.

Strong new sales of RM4.07b in FY24. Eco World achieved total new sales of RM4.07b in FY24, surpassing its new sales target of RM3.5b. The strong sales in FY24 were mainly driven by land sales of RM626m. Overall, 57% of total new sales in FY24 were contributed by residential projects, 16% contributed by commercial projects and 27% contributed by industrial projects. Going forward, Eco World is eyeing to expand the industrial projects segment due to high demand for industrial products.

Meanwhile, Eco World is setting a new sales target at RM3.5b for FY25.

Maintain NEUTRAL with a revised TP of RM2.01. We revise our FY25/26F earnings forecast by +17%/+34% to factor in higher progress billing. We also introduce our earnings forecast for FY27F. We revise our TP for Eco World to RM2.01 from RM1.84 as narrow our RNAV discount to 15% from 22% in view of the better earnings visibility. Nevertheless, we think that the positives have been largely priced in as Eco World trading above its latest NTA of RM1.66 per share. Hence, we maintain our NEUTRAL call on Eco World.

Source: MIDF Research - 13 Dec 2024