Eco World remains strong pick as it surpasses consensus earnings forecasts

Kuching: Eco World Development Group Bhd (ECW) remains a strong pick among consensus as its ninth month financial year 2016 core net income (CNI) has surpassed consensus estimates by achieving 86 per cent of it.

The research arm of Midf Amanah Invest Bank Bhd (Midf Research) believes that this is most likely due to consensus underestimation of ECW’s margin which has shown tremendous improvement of four per cent year over year (YoY).

Conversely, AmInvestment Bank Bhd (AmInvestment Bank) believes that the result was achieved on the back of progress billings on projects launched with cumulative sales of RM6.2 billion over the last two years.

“It also reflected nine months recognition vs seven months previously for the projects arising from the acquisition of development rights,” it said.

Regardless, it is undisputed that ECW’s progress thus far has been amazing, especially commendable when considering the relatively weak property market.

“It seems that what sets them apart of its competitors are their strong marketing an concept offerings” explained the research arm of Kenanga Investment Bank Bhd (Kenanga Research).

This in turn has helped ECW build strong market confidence and unrivaled brand name within the property sector as their ability to maintain such strong sales rates is reflected of buyers confidence in them. As such, ECW 9M16 earnings have seen a leap of 312 per cent YoY.

While Kenanga research believes that “This is largely due to the normalisation of billings from new sales garnered when ECW was established” , there is consensus among analysts that ECW’s strong sales will be anchored by their 11 ongoing projects, and it’s imminent launch of Bukit Bintang City Centre.

Additionally, Kenanga Research also reported that recently the group has rolled out a global launch of four new projects, Eco Ardence, Eco Grandeur, Eco Bloom and Eco Business Park 2.

These new projects have an accumulated estimated gross development values ( GDV) of approximately RM1 billion with average indicative take up rate or bookings at 81 per cent.

Meanwhile, the previously proposed initial public offering (IPO) of Eco World International Bhd ( EWI) is expected to be concluded soon.

“It will then seek shareholders’ nod for the subscription of up to 30 per cent of EW’s enlarged share capital. EWI’s three projects in London and one in Sydney have posted cumulative sales of 958 million pounds as at Aug 31” stated AmInvestment Bank.

Additionally, Kenanga Research in a previous company update on EWC stated that “The IPO of EWI should also boost Eco World sales as Eco World will be able to secure its share of sales from EWI”.

Moreover in a recent company announcement on Bursa Malaysia, ECW announced that it will be proceeding with its proposed private placement of 591.07 million shares which represents up to 25 per cent of its existing paid up capital. Half of the generated proceeds estimated at RM389 million will be utilised to pay for EWI’s subscription.

Based on ECW’s current performance and expected future prospects, it remains a strong pick amongst analysts with maintained strong calls and unchanged target prices.