This article first appeared in The Edge Malaysia Weekly on December 16, 2019 - December 22, 2019

ECO World Development Group Bhd (EcoWorld) and its 27%-owned associate and international arm, Eco World International Bhd (EWI), beat market expectations to post solid fourth-quarter revenue and profit last week, buoyed by a strong all-round performance for the financial year ended Oct 31, 2019 (FY2019).

This is just the start for EcoWorld CEO Datuk Chang Khim Wah and EWI president Datuk Teow Leong Seng, who plan to break more records.

For one, shareholders of EcoWorld and EWI can look forward to a cash windfall as the two companies are targeting to declare a maiden dividend in FY2020.

More importantly, the record earnings, which are arguably all that matters, should allay investors’ recent concerns over EcoWorld’s debt level, which is relatively higher than its peers.

“If you look at our results this year, our gearing is coming down, our cash position has improved, our sales performance has been very consistent while our future revenue and earnings visibility remain strong. We are optimistic that FY2020 will be an even better year for us and that the best is yet to come,” Chang told a news conference to announce the group’s financial results for the fourth quarter ended Oct 31 (4QFY2019) last Thursday.

“Considering that most of the heavy-lifting and infrastructure for all our existing projects have more or less been completed, we just have to continue to innovate and stay relevant to the market’s needs,” he said.

As at Oct 31, EcoWorld’s net gearing position was 0.70 times, compared with 0.77 times a year ago. Shareholders’ funds totalled RM4.538 billion while net asset per share has steadily increased to RM1.54 for FY2019 from RM1.47 in FY2018.

Chang says as much as EcoWorld intends to reduce debt, its gearing ratio remains manageable. “Of course, who doesn’t want to be at 0.1 times or 0.2 times? But for a six-year-old company like ours, we have 18 active projects and over RM5 billion in future revenue ... we are not overly concerned about our gearing.”

EcoWorld, spearheaded by chairman Tan Sri Liew Kee Sin, saw its net profit more than double to RM203.42 million in FY2019, from RM93.49 million the previous year. Revenue grew 24% year on year to RM2.46 billion from RM1.98 billion in FY2018.

Notably, FY2019 saw the highest number of completions and handover of properties sold. A total of 5,763 units — 3,367 landed homes, 1,844 apartments, 429 commercial and 123 industrial units — were handed over during the year.

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

“Obviously, Tan Sri [Liew] would want to see vertical growth,” he says half in jest. “But we also have to take into consideration that market conditions remain tough. Definitely, for any businessman or any company, we always have to look for growth — aggressive growth if we can. If you look at what we have done over the years, what we have put on the ground, we are confident.”

Contrary to the general perception that developers are suffering amid a weak property market in Johor, Chang says EcoWorld is doing well there, adding that the group achieved sales of over RM700 million in FY2019.

“If anyone tells you the Johor property market is weak, it is not true. If you are in the right location and selling the right properties, you will do well,” he tells The Edge.

Chang adds that EcoWorld is focusing on townships, landed properties, industrial parks as well as commercial properties such as shopoffices in Johor.

“Our factories in Eco Business Park are doing very well. We are building the infrastructure and we are bringing vibrancy into the townships. Our market presence there is very strong. In fact, we do not mind doing a few more townships and industrial parks in Iskandar Malaysia,” he says.

Chang says townships and industrial parks are the two market segments that have served EcoWorld well and their prospects remain bright.

“The government is doing a good job, creating a lot of employment opportunities in Iskandar Malaysia. The job situation in Singapore remains good. Many Malaysians still go to Singapore to work. Definitely, we want to increase our presence in Johor, but at the same time we have to be prudent when it comes to acquiring land,” he says.

EWI pulled off an impressive turnaround

EWI also pulled off an impressive turnaround during the year just ended, registering a net profit of RM187 million against a net loss of RM11.23 million in FY2018. Revenue, however, was 63% lower at RM478,000 in FY2019 compared with RM1.3 million in FY2018.

The timely completions of Block A05 of Embassy Gardens and Block E of London City Island in 4QFY2019 enabled EWI to record more than RM100 million increase in net profit for the quarter, compared with the same period last year.

EWI’s Teow acknowledges that this contributed strongly to the group’s net profit for the full FY2019.

He says that over the past few years, EWI has spent most of its time launching new projects in the Greater London area, and these projects have done well domestically and internationally.

“We know that the UK is going through Brexit. The high-end market is slow, but the mid-market, where we are, is still doing well. In fact, house prices over the past few months have been recovering as volume has gone up significantly,” Teow adds.

He points out that EWI has RM5 billion worth of unbilled sales, which will underpin its earnings for FY2020 and FY2021. “We are going to complete a few projects next year. We expect next year to be a very good year for us. We are targeting a combined two-year sales target of RM6 billion for FY2019 and FY2020.”

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