Eco World ready to replicate S P Setia’s success story

Eco World Development Group Bhd (June 22, RM1.57)

Rating under review with target price (TP) to be determined: We attended Eco World Development Bhd’s (ECW) analyst briefing recently and returned with a positive view on the company. The management shared their year-to-date May 2015 sales of RM1.2 billion, which has met 40% of its financial year 2015 (FY15) sales target of RM3 billion. The outlook for the group remains convincing despite the slowdown in the property market due to buyers’ “wait and see” stance as a result of the goods and services tax implementation and tighter lending environment by banks. ECW is now ready to fly high, replicating S P Setia’s success story, especially with the completion of its restructuring and fundraising exercise.

ECW’s management is confident that it may be able to rake in RM3 billion in property sales in 2015.

In-line with that, we are confident in ECW given the management’s capability in delivering its key performance index, judging by the past records and successful management of S P Setia. ECW management team is currently led by former S P Setia directors and executives with rich experience in local and international property markets. Among the prominent names that shifted to ECW are Tan Sri Liew Kee Sin (former S P Setia CEO), Datuk Chang Kim Wah, Datuk Eddy Leong Kok Wah and Tan Sri Abdul Rashid. We believe the entire group will transfer their skills in S P Setia to ECW as we gathered not only top management migrated to ECW, but also several hundred staff have already joined ECW.

Furthermore, most of ECW’s projects are earmarked for township developments and will continue to use “eco” features that were introduced by ECW’s top management during their stint in S P Setia. Although ECW’s share price has been quite volatile of late due to hiccups in SPAC listing as well as weaker-than-expected property sales, we are positive on the company given its long-term prospect due to its aggressive expansion plan and business model, apart from its reputable management team. — M&A Securities

This article first appeared in The Edge Financial Daily, on June 23, 2015.