EcoWorld eyeing RM3.5b sales in FY18

Eco World Development Group Bhd (Dec 18, RM1.48)

Maintain neutral with a lower target price of RM1.60: Eco World Development Group Bhd’s (EcoWorld) core net income (CNI) for the financial year ended Oct 31, 2017 (FY17) of RM113.1 million was within expectations. It made up 99% of our and 93% of consensus estimates. Our CNI excluded the one-off gain of RM96.6 million arising from dilution of equity interest (mainly from Paragon Pinnacle which is the company that owns the Ijok land bank).

EcoWorld achieved RM4.01 billion sales in FY17 and met its target of RM4 billion for the year. The sales recorded in the fourth quarter of FY17 were strong at RM1.83 billion due to the success of its “EcoWorld DNA” campaign, which focused on the best elements of design, nature, and art. Five projects were concurrently launched, out of which three were maiden launches and two were new phases within existing townships. The maiden launches were Eco Horizon in Penang, Eco Forest in Semenyih, and Eco Business Park V in Ijok, Selangor. The two new phases were Dremien@Eco Ardence in Shah Alam and Whitten@Eco Majestic City in Semenyih.

EcoWorld is targeting RM3.5 billion sales in FY18. While this is below our initial estimate, we understand that this is mainly caused by the absence of major launches in FY18. The strategy in FY18 is geared towards enhancing the value of its existing land bank with the aim of delivering sustainable long-term growth for all stakeholders.

We trim our FY18 CNI estimate by 5% to RM191 million after imputing lower sales target for FY18 and FY19. Unbilled sales of RM6.4 billion reflect 2.2 years of earnings visibility. — MIDF Research, Dec 18

This article first appeared in The Edge Financial Daily, on Dec 19, 2017.

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