This article first appeared in The Edge Financial Daily on December 13, 2019

KUALA LUMPUR: After reporting their strongest-ever performance for the financial year ended Oct 31, 2019 (FY19), Eco World Development Group Bhd (EcoWorld Malaysia) and its 27%-owned associate and international arm, Eco World International Bhd (EWI), say the best is yet to come.

“This is probably our strongest results since we started. However, we are confident that the best is yet to come,” said EcoWorld Malaysia president and chief executive officer Datuk Chang Khim Wah at a results briefing yesterday.

Chang is expecting an “aggressive growth” going forward, on the back of unbilled future progress billing of RM5.16 billion, which should provide earnings visibility over the next two to three years for the group.

“We are very optimistic about achieving our RM6 billion [property sales] target for [combined] two years (FY19 and FY20), driven by the existing township and integrated commercial projects. We have seen the buying trends over the last two months have been very strong and we expect this trend to continue in 2020,”Chang added.

“As far as sales are concerned, we have achieved RM2.7 billion in [FY19] and the sales momentum has been very strong, especially in the last quarter of the financial year.

In FY19, EcoWorld Malaysia achieved RM2.7 billion in new property sales and saw its largest number of completions and handovers of properties sold.

A total of 5,763 units were handed over, comprising 3,367 landed homes, 1,844 apartments, 429 commercial units and 123 industrial units. More than 16,400 properties have been delivered to customers since FY16.

In anticipation of better performance in FY20, both EcoWorld Malaysia and EWI are targeting to declare their first dividends for that year.

“We have to plan carefully and we have to look at the overall situation. Despite being a very challenging year, we remain optimistic that FY20 will be a better year for us,” he said.

Chang said the group will continue to reduce its debts by actively managing its cash flow, being prudent in its property launches and ensuring its sales continue to do well. As at Oct 31, 2019, the group’s net gearing ratio was 0.7 times, against 0.77 times last year.

“The gearing of 0.7 times is not so bad for a young company like us. Most of our loans are tied to the projects, so most of our payments to the banks are quite healthy. We feel that at 0.7 times, it is a good place to be. But for a six-year-old company, we have 18 active projects, we have RM5.2 billion future revenue, we are not overly concerned about our gearing. Definitely, we want to see it (debt level) keep coming down,” he explained.

Yesterday, EcoWorld Malaysia announced that net profit jumped by six times year-on-year (y-o-y) to RM81.46 million for the fourth quarter ended Oct 31, 2019 (4QFY19) from RM12.80 million, while revenue grew 96.5% to RM906.54 million from RM461.35 million last year.

For FY19 as a whole, net profit rose 117.58% y-o-y to RM203.42 million from RM93.49 million, while revenue rose 24.05% to RM2.46 billion from RM1.98 billion a year ago.

EWI, meanwhile, recorded a nine-times growth in its net profit for the fourth quarter 4QFY19 to RM118.29 million from RM12.55 million a year ago, despite its revenue falling 80.51% to RM254,000 from RM1.3 million. Its full-year net profit totalled RM187 million against a net loss of RM11.23 million for FY18, while revenue was 63.32% lower at RM478,000 from RM1.3 million.

Commenting on EWI’s performance, its president and CEO Datuk Teow Leong Seng said: “Over the years, we have been registering strong sales, but we are unable to recognise them as revenue because the accounting rules in the UK and Australia are very different from Malaysia’s.

“What we have done in 2019 is to work our construction sites very hard. Through FY19, we have started to deliver a block at London City Island, and we have also delivered a block at Embassy Gardens. We also adopt built-to-rent (BtR) and that is starting to bring in revenue and profits for this year.”

Notwithstanding the current market uncertainty due to Brexit, Teow said its mid-range properties are doing well, as evidenced by the 67% rise in sales of products priced from £500 (RM2,738) psf to £800 psf in FY19.

“Likewise, in Australia, house prices have been going up over the last three months, especially after the federal election where the Liberals got back to power and since then, we have seen more investor-friendly measures such as interest rate cut; credit conditions are better,” Teow added.

On prospects, Teow said EWI’s earnings will be underpinned by its strong future revenue of RM5 billion, which will support its earnings for the next two years.

“We expect next year to be a very good year for us. Similar to EcoWorld Malaysia, we are also targeting a combined two-year sales target of RM6 billion for FY19 and FY20,” he added. In FY19, EWI recorded RM1.123 billion in property sales. The group said it will work towards delivering Wardian, West Village, Yarra One and the last residential block in London City Island in FY20.

This will enable a significant portion of the RM5 billion effective share of future revenue to be translated into revenue and profits from joint ventures in FY20, thereby sustaining the earnings growth momentum of the group in FY20.

EcoWorld Malaysia’s share price closed 2.68% or two sen higher at 76.5 sen yesterday, valuing the group at RM2.25 billion, while EWI settled 3.85% or four sen lower at RM1 with a market capitalisation of RM2.4 billion.