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Tuesday, December 15, 2015

EcoWorld confident of achieving higher sales in FY16

This article first appeared in The Edge Financial Daily, on December 14, 2015.
Eco World Development Group Bhd ( Valuation: 1.10, Fundamental: 0.85)
(Dec 11, RM1.50)
Maintain add with an unchanged target price of RM1.90: Eco World Development Group Bhd’s (EcoWorld) financial year 2015 (FY15) results were above expectations, as net profit came in 12% above our forecast and beat the consensus estimate by a wider margin of 37%.

Unbilled sales increased from RM3.99 billion in the third quarter (3QFY15) to RM4.16 billion in 4QFY15. EcoWorld did not declare any final dividends, below our expectation of one sen.

EcoWorld sold RM3 billion worth of properties in FY15, exactly in line with its target. RM1.58 billion or 53% of the total came from the Klang Valley, while RM1.21 billion or 40% came from Johor, and RM224 million or 7% from Penang.

The group is keeping its sales target of RM4 billion in FY16. This is very commendable, given that most developers have suffered lower sales this year and are not optimistic about the outlook for next year.

EcoWorld is likely to pull further ahead of competitors in the coming years. The RM4 billion sales target includes its portion of the Bukit Bintang City Centre (BBCC) project (40%) and Eco World International (30%), but does not include Eco Marina.

Major upcoming projects to keep a close watch on in FY16 would be the RM8.8 billion, 19.4-acre (7.85ha) BBCC project next to the major shopping district in Kuala Lumpur and the RM10 billion, 300-acre Eco Marina township in Batu Kawan, Penang.

Given the size of these projects and their strategic locations, they are likely to be key contributors to FY16 sales. The 40%-owned BBCC project holds much promise and should draw strong interest once it wraps up a joint-venture partnership for the one million sq ft mall.

Chief executive officer Datuk Chang Khim Wah is upbeat about the group’s performance and confident of achieving its high sales target for FY16. In fact, the sales target could be exceeded if Eco Marina is launched in time in FY16. — CIMB Research, Dec 10


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