Kenanga upgrades EcoWorld to 'outperform' after higher 2Q profit

KUALA LUMPUR (June 17): Kenanga Research has upgraded its rating of Eco World Development Group Bhd (EcoWorld) to "outperform" after it posted a higher net profit for the second quarter ended April 30, 2022 (2QFY22).

EcoWorld's net profit increased to RM45.67 million for 2QFY22 from RM42.32 million for 2QFY21 due to higher sales and percentage of project completion achieved, as well as the realisation of cost savings for several completed and nearly-completed phases.

Revenue for the quarter also appreciated to RM506.89 million from RM420.46 million previously.

In a note, Kenanga said despite rising construction costs, EcoWorld would be able to defend its operating margins relatively well through product innovation, prudent marketing expenses and a lean workforce.

“That said, we do expect the rising overnight policy rate to pose headwinds towards sales.

“Meanwhile, the company guides that the ongoing labour shortages are manageable and work at sites have been progressing as planned," it said.

Meanwhile, CGS-CIMB has also upgraded its call on EcoWorld to "add", noting that demand for industrial properties has picked up.

"We observe a strong surge in demand for its industrial products as business activities picked up after the reopening of borders on April 22," it said.

At 11.30am on Friday (June 17), EcoWorld’s share price stayed flat at 67.5 sen, with 496,000 shares traded.