Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on September 15, 2017

KUALA LUMPUR: Eco World Development Group Bhd (EcoWorld) recorded a 76% year-on-year jump in net profit for the nine months ended July 31, 2017 (9MFY17), to RM175.94 million from RM99.93 million, thanks largely to a gain from the dilution of its interest in then wholly-owned Paragon Pinnacle Sdn Bhd in the first quarter of the year.

Recall that the Employees Provident Fund took up a 40% stake in Paragon Pinnacle to jointly develop 2,198.4 acres (889.66ha) in Ijok, Kuala Selangor.

Besides that, EcoWorld’s earnings for the period were also boosted by a stronger top line, which grew 12% to RM2.03 billion, from RM1.81 billion a year ago.

Though it expects earnings to grow consistently as more projects reach a higher stage of completion, it said profit for the year may be moderated due to existing funding costs incurred, as well as the share of losses of its joint-venture (JV) companies that have not attained the criteria for profit recognition.

“Nevertheless, based on the results achieved for the nine months [ended] July 31, 2017 and having regard to the strategic decision made to invest in the respective joint-ventures, the board believes that the performance of the group for FY17 will be satisfactory,” it said in a Bursa Malaysia filing.

The property developer achieved RM772 million sales for the third quarter ended July 31, 2017 (3QFY17), 40% stronger than the RM552 million it posted for 2QFY17.

EcoWorld president and chief executive officer (CEO) Datuk Chang Khim Wah said in a statement the group’s strong 40% quarter-on-quarter pickup in sales for 3QFY17 was “very encouraging”.

“During the first half of the year, we were busy handing over the first phases of properties sold and to date, we have delivered close to 4,500 units to our purchasers. We are delighted that the strong engagement with customers achieved during the handover process has resulted in positive word-of-mouth and increased referrals which boosted sales, especially for Eco Majestic in Semenyih, and Eco Spring, Eco Summer and Eco Tropics in Iskandar Malaysia,” he added.

As at end-August, EcoWorld’s unbilled sales stood at RM6.22 billion, while total property sales amounted to RM2.39 billion, up 9% from the RM2.2 billion it recorded for January to August last year. This brings total sales under the EcoWorld brand to RM3.95 billion for the first 10 months of FY17 ending Oct 31, with Eco World International Bhd (EWI) contributing RM1.56 billion to the tally.

EcoWorld said its six projects in the Klang Valley have contributed RM1.8 billion to the year-to-date sales, while its seven projects in Iskandar Malaysia contributed RM525 million, and the current two projects in Penang contributed RM65 million. 

Meanwhile, it said EWI’s three projects in London recorded sales of £237 million (RM1.31 billion) and two projects in Australia contributed A$73 million (RM 249 million).

For the remaining two months of FY17, EcoWorld said it will be working to achieve its sales target of RM4 billion from Malaysian projects and RM2.5 billion from international projects.

 “This (the target achievement) will enhance the group’s growth prospects going forward into FY18, when projects undertaken by the group’s joint ventures are expected to begin contributing to earnings,” EcoWorld’s filing read.

For 3QFY17, EcoWorld’s net profit came in at RM26.09 million compared with RM44.58 million a year ago, though revenue grew 5% to RM762.92 million from RM727.34 million.

The third-quarter earnings were affected by higher finance costs incurred from new term loans that were secured to fund its future investments in JVs and associate companies. Finance cost came in at RM21.34 million compared with RM7.53 million a year ago.

Initial losses incurred by its JV companies — namely EWI, Eco Grandeur, Eco Ardence and Bukit Bintang City Centre, pending the commencement of property development profit recognition — also led to the lower earnings, it said.

Revenue for the quarter was stronger, it said, thanks to a higher percentage of completion and higher number of units sold having attained the criteria for profit recognition.

But the gross profit margin was lower due to the commencement of income recognition for lower-margin products (Rumah Mampu Milik and Rumah Selangorku) launched last year.

EcoWorld is planning a “massive mega-launch” of four projects before end-FY17, three in the Klang Valley (Eco Forest, Eco Business Park V and the second phase of landed homes in Eco Ardence) and one (Eco Horizon) in Penang.

“Last year, our EcoWorld’s Firsts campaign where we launched four projects concurrently was a runaway success with more than RM1 billion worth of properties taken up in a single day. This year, we aim to repeat this feat and we are truly excited to show our customers what we have in store for them,” said Chang.

Meanwhile, EWI trimmed its net loss to RM24.2 million in 3QFY17 from RM46.4 million a year ago, thanks to a stronger British pound. Quarterly revenue came in at RM97,000 versus RM288,000 for 3QFY16.

The group, which was listed on April 3 this year, recorded a net loss of RM55.1 million for 9MFY17, 66.6% lower than the RM165 million for the prior year. Revenue came in at RM461,000 versus RM500,000 previously.

On prospects, EWI president and CEO Datuk Teow Leong Seng said: “Our projects in the United Kingdom have continued to see steady sales and there are anecdotal signs of recovery in demand not just for new home sales but also for office space, despite ongoing uncertainties surrounding Brexit. This validates our confidence that London will retain its status as one of the world’s foremost global cities and a leading economic, financial, educational and cultural destination.”

EWI said it will continue to look for well-located development sites in London and Australia.

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