Eco World Development
Group Bhd
(April 17, RM1.86)
Maintain buy with a target price of RM2.35: Eco World Development Group Bhd (ECW) announced that it had received a letter of award (LoA) from the Penang Development Corporation for the proposed acquisition of 299.64 acres (121.26ha) of 99-year leasehold land for RM730.93 million (at RM56 per sq foot [psf]) for mixed development, and proposed leasing of a 150-acre piece of land for 30 years (with 30-year renewal option) for the development of an international standard golf course for RM65.34 million (at RM10 psf).

ECW will be planning a major township development, Eco Marina, worth RM10 billion with 60% residential and 40% commercial properties with water-fronting facades.

While the proposed land acquisition at RM56 psf may appear high, this could be due to the 2.5km coastline that results in the premium pricing.

Nevertheless, the total purchase consideration of RM796 million only accounts for 8% of Eco Marina’s gross development value which underscores ECW’s confidence in rolling out a successful township development.

ECW’s board is currently reviewing the detailed terms of the LoA and more information on the deal will be furnished upon its acceptance.

Assuming that Eco Marina is developed over 15 years, it will increase our revalued net asset value (RNAV) by RM0.25 or 8% of our RM2.97 RNAV.

We continue to like ECW for the proven and impeccable track record of its key senior executives, who have helped the developer to establish a strong branding among property buyers. — AllianceDBS Research, April 17

This article first appeared in The Edge Financial Daily, on April 20, 2015.