This article first appeared in The Edge Financial Daily on January 10, 2020

Eco World Development Group Bhd
(Jan 9, 72 sen)
Maintain hold with a higher fair value (FV) of 75 sen: We maintain our “hold” recommendation on Eco World Development Group Bhd (EcoWorld) with a higher FV of 75 sen (from 73 sen) per share. We increase our FY20–22 earnings forecasts by 4.1%, 1.7% and 1.1% respectively to reflect the timing of revenue recognition.

We recently met up with EcoWorld’s management for updates on the company’s plans for 2020. Management expects financial year 2020 (FY20) to remain stable, supported by an increasing number of maturing projects in Malaysia and overseas. EcoWorld registered new sales of RM2.7 billion in FY19. The company is maintaining its combined two-year (FY19–20) sales target of RM6 billion.

For FY20 and beyond, EcoWorld is planning to build a wider range of homes with various concepts at affordable prices, suitable for first-time homebuyers and the M40 group. Recently, the company introduced its “Design2Own” application that allows customers to create the internal layout of their dream homes, thus increasing options available to cater to a wider audience, especially the younger generation.

In December 2019, EcoWorld acquired 200 acres (80.94ha) of freehold land in Iskandar Puteri for RM1.67 billion mainly to capture the M40 group with properties priced between RM300,000 and RM450,000. On top of that, EcoWorld is also planning to launch properties with prices starting from around RM400,000 in their existing townships in Malaysia.

For overseas projects, particularly in the UK, the management noted that the property market may have bottomed out and believed uncertainties surrounding Brexit have reduced. The UK property market has shown price improvement in the past several months. EcoWorld’s 27%-associate Eco World International Bhd (EWI) expects to hand over RM3 billion worth of properties (Wardian London, Kew Bridge, London City Island and Barking Wharf) in the UK in 2020. As a result, we shall see stronger earnings from joint ventures and associates for EcoWorld in FY20.

We believe the outlook for FY20–FY21 remains stable, supported by unbilled sales of RM3.8 billion for EcoWorld Malaysia and RM1.3 billion for EWI with an increasing number of maturing projects in Malaysia and overseas. We maintain “hold”. — AmInvestment Bank, Jan 9