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Eco World Development’s Q1 FY24 Earnings Within Estimates, Says PublicInvest

KUALA LUMPUR: Eco World Development Bhd’s (EWD) first quarter (Q1) FY24 net profit was RM69.6 million, which was within Public Investment Bank Bhd’s (PublicInvest) and consensus full-year estimates.

Eco World Development Bhd’s sales of residential homes remain the company’s biggest contributor, with Eco Townships and Eco Rise Pillars accounting for RM799 million or 63 percent of total sales.

PublicInvest noted that the property developer secured RM1.26 billion in pre-sales in 4 months, with 57 per cent or RM723 million from Iskandar Malaysia, or about 36 per cent of its FY24 sales target of RM3.5 billion.

The strong sales momentum increased EWD’s unbilled sales to RM3.88 billion as of February 2024, PublicInvest noted.

Separately, PublicInvest said that EWD’s share of results of its joint ventures for Q1 FY24 was 9.4 per cent higher year-on-year (YoY) due to Eco World International Bhd (EWI) recording a profit instead of a loss during the quarter.

EWD’s gross and net gearing levels as of January 2024 remained low at 0.52x and 0.28x, respectively, even after completing the 403.78-acre Kulai land acquisition (balance 90 per cent land price of RM190 million) and paying its FY23 final dividend, amounting to RM58.9 million, to shareholders in Q1 2024.

On sales, PublicInvest noted that EWD’s FY24 sales target is within reach. Sales momentum continued into Q1 FY24, with about RM1.26 billion secured in four months.

“We understand that its projects in Iskandar Malaysia have performed well, with about RM723 million secured or 57 per cent of EWD’s total year-to-date (YTD) sales for FY24,” PublicInvest noted.

Currently, EWD has eight ongoing projects in Iskandar Malaysia. Sales of residential homes remain the biggest contributor for the company, with Eco Townships and Eco Rise Pillars bringing in RM799 million or 63 per cent of total sales.

These include sales from new launches of landed homes at Eco Spring and Eco Tropics in Iskandar Malaysia as well as Eco Grandeur in the Klang Valley.

“EWD also recently launched Sa.Young D’ Eco Botanic in Iskandar Malaysia which we understand is well received by the market.

“Going forward, the company is preparing for the launch of Se.Duduk D’ Kajang, which is its first duduk apartments to be developed outside an EcoWorld township,” PublicInvest said.

Relatively, EWI secured RM243 million in property sales plus reserves of RM203 million, adding up to a total of RM446 million for the first four months of FY24. This was driven mainly by Embassy Gardens, which brought in RM105 million in sales, followed by Wardian (RM75 million) and Yarra One (RM20 million).

“We understand that as of February 29, 2024, EWI has approximately RM650 million of completed and nearly completed stocks available for sale, of which the company’s effective share is approximately RM500 million,” PublicInvest noted.

The research firm said completed stock sales are estimated to generate excess cash up to RM500 million for EWI over 2024 and 2025.

Separately, the company has 18 existing and upcoming projects in the United Kingdom and Australia, with a total gross development value of GBP4.6 billion and A$0.7 billion, respectively.

“We keep our earnings unchanged and maintain our Neutral call. Our target price increased to RM1.30 from RM1.15 previously as we narrowed the discount to book value to 20 per cent from 30 per cent as sector valuations improved.

“We believe it deserves a premium given its strong sales track record and attractive dividend yield,” PublicInvest said.

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