Analysts positive on Eco World’s JV in Penang

KUCHING: Analysts are generally positive on Eco World Development Group Bhd’s (Eco World) joint venture (JV) with the Employees Provident Fund Board (EPF) to develop prime land in Penang.

In a statement to Bursa, the group had entered into a conditional subscription and shareholders’ agreeement (SSA) with the EPF to jointly develop 375 acres of prime land in Batu Kawan, Penang.

Eco World said that the lands will be developed by its wholly-owned subsidiary Eco Horizon Sdn Bhd (EHSB) into two complementary townships, known as Eco Horizon and Eco Sun.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) was positive on the news as EPF’s subscription into EHSB will reduce Eco World’s capital commitment on the project.

As such, MIDF Research believed that Eco World’s financial year 2017 (FY17) net gearing should remain manageable.

Meanwhile, AllianceDBS Research Sdn Bhd (AllianceDBS Research) was positive on the new growth model adopted by Eco World to embark on major strategic developments without over- stretching the group’s balance sheet.

“This will help to address concerns over gearing, as new township projects typically will require significant amounts of capital investment,” the research house said.

“Also, this marks the third JV partnership with EPF which attest to the strong confidence that the retirement savings fund has in Eco World.”

AllianceDBS Research maintained ‘buy’ on Eco World and target price of RM1.80 per share, based on a 20 per cent discount to its RNAV.

“We believe Eco World deserves to trade at a lower discount relative to its peers given its prominence as the bellwether of the Malaysian property sector with persistent outperformance in a weak market.

“We continue to like ECW for the proven and impeccable track record of its key senior executives, who have helped the developer to establish strong brand recognition among property buyers,” the research house said.

As for MIDF Research, pending the completion of the deal, the research arm maintained its earnings forecast for both FY17 and FY18.

MIDF Research also maintained ‘buy’ on the stock with a target price of RM1.68 per share.

“We continue to like Eco World for its excellent sales achievement, superior earnings growth prospects and strong branding,” the research arm said.