EcoWorld shares rise, analysts positive as plan for RM3b industrial park advances

• Analysts said the development reinforces EcoWorld’s long-term growth prospects from resilient demand for industrial assets, while the price tag for the project land is also fair.

KUALA LUMPUR (April 21): Shares of Eco World Development Group Bhd (KL:ECOWLD) rose on Monday, after a planned industrial park worth nearly RM3 billion took another step forward.

The counter climbed as much as eight sen or nearly 5%, its strongest single-day gain since April 10. At the last price of RM1.83, the property developer had a market capitalisation of RM5.4 billion. Trading volume totalled 1.85 million shares so far.

Analysts said the development reinforces EcoWorld’s long-term growth prospects from resilient demand for industrial assets, while the price tag for the project land is also fair.

“We believe the group’s track record in the execution of industrial parks speaks for itself, and we are positive that demand for its industrial offerings would continue to be healthy,” Public Investment Bank said in a note on Monday.

EcoWorld signed a tripartite agreement for 55% in a special purpose vehicle to develop the 1,195-acre project within the Malaysia Vision Valley 2.0 economic corridor. SD Guthrie Bhd (KL:SDG) will hold a 30% stake, and Negeri Sembilan state agency NS Corporation will have the remaining 15%.

EcoWorld, to be appointed as the development manager, will pay RM572.76 million to acquire the land from SD Guthrie to develop the project to be known as Eco Business Park VII in the Jimah district. NS Corp will be the state-appointed coordinator and custodian of the corridor master plan.

To Kenanga Investment Bank, the planned park will solidify EcoWorld’s presence in the corridor that benefits from high accessibility through the Kuala Lumpur International Airport and major expressways.

“Its scale and strategic location within a national growth corridor will position it well to attract quality industrial tenants over time,” the research house said. The sheer size of the land bank also offers EcoWorld long-term flexibility in product offerings and development phasing, it noted.

Shares of EcoWorld have fallen more than 12% year-to-date, in line with broader market weakness, though analysts remain largely bullish. Nine out of 10 analysts tracked by Bloomberg have a ‘buy’ call on the stock, with a 12-month target price of RM2.27, implying a 24% upside.

Public Investment Bank is the sole research house with a ‘neutral’ view.

The acquisition price, which translates into RM11 psf, is also fair, according to analysts including Kenanga and MIDF Amanah Investment Bank.

The financial impact on EcoWorld's balance sheet, meanwhile, will be minimal, according to MIDF.  Based on its 55% stake, the effective share of the estimated gross development value comes to RM1.62 billion, or around RM180 million per year, based on even roll-outs over nine years, it said.

"We remain positive on EcoWorld as the growing contribution from industrial development bodes well for future prospects for EcoWorld," the house added. 

SD Guthrie to monetise more land

As for SD Guthrie, analysts are now anticipating more industrial land developments from the palm oil producer to unlock value of its vast land bank through strategic joint ventures.

The sale of 1,195 acres is estimated to net SD Guthrie a gain of RM430 million once the deal is done this year, Kenanga said, noting that the company currently owns 16 estates in Negeri Sembilan covering 36,165 hectares, with a carrying value of RM806 million or just 21 sen psf.

Shares of SD Guthrie fell one sen or 0.22% to RM4.59 at noon on Monday, bringing its year-to-date gain to 7.27% and valuing the group at RM31.74 billion. The consensus is currently divided, with nine ‘buy’ versus nine ‘hold’ and ‘sell’ ratings.

The average 12-month target price is RM5.09 — suggesting a 10% upside from the current price. 

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