KUALA LUMPUR (June 29): Eco World Development Group Bhd’s (EcoWorld) net profit rose 2.3% to RM34.45 million in the second financial quarter ended April 30, 2018 (2QFY18), from RM33.68 million a year ago, on contribution from its projects in the Klang Valley, Iskandar Malaysia in Johor, and Penang.
This resulted in higher earnings per share of 1.17 sen for 2QFY18 from 1.16 sen in 2QFY17. The group achieved sales of RM923 million as at April 30 from its Malaysian projects.
Quarterly revenue, however, fell 2.6% to RM498.69 million in 2QFY18 from RM670.02 million a year ago.
In a filing with Bursa Malaysia yesterday, EcoWorld said the lower quarterly revenue was because the majority of projects undertaken by the group’s subsidiaries had been handed over the initial phases of properties sold.
“Since 2QFY17, close to 7,500 units have been or are in the process of being delivered to customers,” it added.
For the cumulative six months (1HFY18), EcoWorld’s net profit dropped 60.9% to RM58.54 million from RM149.85 million a year ago, while revenue fell 15.9% to RM1.06 billion from RM1.26 billion in 1HFY17.
The group said the lower 1HFY18 earnings were largely because the previous year had included a gain on dilution of equity interest in its unit Paragon Pinnacle Sdn Bhd, which arose in 1QFY17.
“While sales interest had picked up following the group’s successful Chinese New Year campaign and good response to the various localised marketing activities at its project sites in the Klang Valley, Iskandar Malaysia and Penang, buying momentum waned in the lead up to the country’s 14th general election (GE14),” said EcoWorld.
“Uncertainties over the outcome of GE14 caused many customers to hold back from making commitments to purchase in the month of April up until early May 2018,” it said.
But post-GE14, there has been a notable shift in the public mood, it noted, with greater optimism and renewed confidence expressed by many regarding their personal futures and that of their families going forward. “Nevertheless, May 2018 continued to be a very quiet month on the sales front as most Malaysians were still caught up with post-election news fever,” it added.
Going forward, EcoWorld said the group’s profit will increasingly be derived from projects undertaken by its various joint ventures (JVs).
“As at April 30, 2018, three of the group’s Malaysian JVs have commenced revenue and profit recognition, enabling RM9 million to be recognised as the group’s share of profit from its Malaysian JVs versus a loss of RM5.3 million in 2QFY17,” it noted.
EWI on track to make maiden profit in FY18
EcoWorld said its international JV, Eco World International Bhd (EWI), is also expected to turn profitable in the second half of this year when projects undertaken by its JVs, namely London City Island and Embassy Gardens, are completed and handed over starting 3QFY18.
In a separate filing, EWI reported that its net loss widened to RM29.08 million in the second fiscal quarter ended April 30, 2018 (2QFY18), from RM24.82 million a year ago, due to a foreign exchange (forex) loss which arose in the current quarter under review compared with a forex gain recorded in 2QFY17.
Loss per share was lower at 1.21 sen for 2QFY18 compared with 2.43 sen in 2QFY17.
EWI recorded sales of RM698 million in the first seven months of its financial year ending Oct 31, 2018 (FY18).
EWI said its projects in London contributed RM546 million, while those in Australia generated RM152 million. As at May 31, 2018, the group’s effective share of unbilled sales stood at RM6.076 billion.
There was no revenue recorded in 2QFY18. The revenue of RM37,000 for 2QFY17 arose from fees for marketing services rendered by a subsidiary of the group’s JV in respect of property sales of its projects in the UK.
“Revenue and profits associated with the group’s property development activities will be recognised by its subsidiary and JV when the construction of the relevant units are completed and delivered beginning next month,” said EWI.
For the cumulative six months ended April 30, 2018 (1HFY18), the group’s net loss also widened to RM45.28 million from RM30.88 million a year ago, mainly due to the forex gain of RM48.24 million recorded in 1HFY17. Revenue stood at RM18,000 compared with RM364,000 in 1HFY17.
EWI said the second half of FY18 will be a significant time for the group as handovers of residential blocks in London City Island and Embassy Gardens are expected to commence next month.
“These handovers will enable the group (via its respective JV entities) to convert a substantial portion of the unbilled sales into revenue, thereby allowing the group to recognise its maiden profit in the current financial year (FY18),” it added.
The construction works of other blocks in London City Island and Embassy Gardens are also well under way with four additional residential blocks in the former and one in the latter scheduled for completion in FY19. Their completion will further boost the group’s profitability next year.
Beyond that, the completion of Wardian, West Village and Yarra One is expected to contribute to the group’s profitability in FY20, said EWI.
This article first appeared in The Edge Financial Daily, on June 29, 2018.