KUALA LUMPUR (April 15): Kenanga IB Research has initiated coverage on Eco World Development Group Bhd at RM1.77 with an “Outperform” rating and target price of RM2.05.
In a note today, the research house said its targ price only offered a 16% total return albeit applying a property RNAV discount of 35% (peer average: 50%).
It said the lower-than-sector average discount was for their: (i) solid management team who were pioneers in property development, (ii) huge appetite for landbanking which will provide strong newsflow, (iii) ability to gain market share due to right product positioning as a township player and their experience with aggressive advertising and promotion.
Kenanga IB Research said resilience was seen in Eco World’s on-going projects as take-up rates for recent launches had been strong at 80%-100% versus industry average of 50%-60% within the first 3 months of launch.
“This will result in strong earnings growth of 420%-344% in FY15E-FY16E.
“Although normalisation of PERs may take up to FY17 as property contributions are still at an early stage while net gearing is expected to remain relatively high at 0.57x-0.65x over FY15-16E, we still like the stock as a longer-term value emerging stock given their aggressive growth path and the management team.
“Expect Eco World to be a ‘must-have’ stock as we will not be surprise if it becomes a market leader,” it said.