KUALA LUMPUR (Sept 14): Eco World International Bhd (EWI) reported a net loss of RM56.68 million for the third quarter ended July 31, 2022 (3QFY22), compared with a net profit of RM2.49 million a year earlier, amid lower profit contributions from projects in Australia.

Also contributing to the poor performance were losses from joint ventures (JVs) due to revision of profit margins on EW London's build-to-rent projects as a result of an extended construction programme, the group said in a Bursa Malaysia filing.

Quarterly revenue dropped 72.86% to RM34.5 million from RM127.13 million in 3QFY21 due to lesser number of units sold being handed over to customers, as the majority of units were handed over in the last financial year.

EWI's revenue comprised property sales proceeds from its projects in Australia, namely Village and Yarra One, as well as the fees for marketing services rendered by a subsidiary to the group's JV in respect of property sales of its projects in the UK.

On a quarter-on-quarter basis, EWI's net loss narrowed slightly from RM67.35 million posted for 2QFY22, despite revenue rising 4.3% from RM33.08 million.

For the cumulative nine months ended July 31, 2022, EWI slipped into the red with a net loss of RM138.69 million, from a net profit of RM69.83 million in the same period of the previous financial year, as revenue decreased 78.29% to RM116.82 million from RM537.97 million.

EWI president and chief executive officer Datuk Teow Leong Seng said the group's 10-month sales and reserves of more than RM2 billion are broadly in line with its sales target and substantially higher than what was achieved in the same period last year.

According to EWI's filing, the group has locked in RM1.73 billion sales based on contracts exchanged in the first 10 months of FY22 with a reservation pipeline of RM361 million as of Aug 31. Total sales plus reserves added up to RM2.09 billion, 58% more than the RM1.33 billion recorded for the same period of FY21.

Teow added that the sustained demand for EWI's properties has contributed to the good progress made on the group's monetisation strategy of selling its completed stocks to accelerate cash build-up.

"Accordingly, we are well positioned to be able to meet our pledge of returning a portion of the excess cash generated to our shareholders within the next one to two years," he said in a statement.

On expansion strategies, Teow said EWI remains cautious given the outlook of the business as the operating environment continues to be challenging with cost increases exceeding house price growth.

He said supply chain issues continue to exacerbate cost pressures and potential delays in construction progress and raise the overall development costs including holding costs and overheads to be borne by developments launched.

This is in addition to rising interest rates, which could further widen the gap between cost inflation and house price growth.

"Given the highly fluid operating environment, we are reassessing the development plans of future launches and will continue to be very selective as we evaluate potential opportunities for land acquisition.

"Whilst this does limit the group's development activities in the near term, continued prudence is necessary given the macroeconomic uncertainties," said Teow.

Meanwhile, EWI will maintain its focus on selling out the completed stocks at EW-Ballymore and Australia projects in the next one to two years. This will generate further cash which should enable additional repayment of advances to be received in the coming months.

"As we focus on realising the value of our remaining completed stocks in London and Australia, we will be generating substantial cash reserves.

"Based on what has been achieved to date, which is reflected in our low net gearing of only 0.07 times, we expect to turn net cash positive by early FY23.

"This will place us in good stead to be able to take advantage of any attractive land-banking opportunities that may emerge once the market enters recovery mode and inflationary pressures as well as supply chain issues normalise," added Teow.

Shares in EWI ended 3.03% or one sen lower at 32 sen on Wednesday (Sept 14), giving the group a market capitalisation of RM768 million.