Eco World Development Group Bhd
Buy. Target price: RM1.83
EXCLUDING RM1.2 million disposal gain of properties, ECW’s Q1’24 core net profit of RM68.4 million was 24% of MIBG/consensus’ FY24E earnings. The -26% QoQ decline in Q1’24 core net profit was due to land sale (92 acres) to Haitian group in Eco Business Park II in Q4’23. YoY, core net profit grew by +21% on better operating margin and better earnings performance from Eco World International (ECWI MK; HOLD; CP: RM0.375; TP: RM0.29), which returned to profitability in Q1’24.
ECW has secured RM1.26b in property sales in 4M FY24, which is 36%/34% of ECW/MIBG’s RM3.5/3.7 billion sales target/assumption for FY24 – in line. Of the RM1.26 billion sales, 45% came from landed residential properties, 24% from industrial properties, 18% from high-rise residential and 13% from commercial lots. Contribution from the high-rise residential and industrial segments are expected to improve as ECW will launch Se.Duduk D’Kajang and Eco Business Park VI in 2H FY24. The latter is already 30%-reserved.
We revise FY24/25/26E earnings by +0.1%/+0.3%/+0.3% after factoring in dividend distribution of RM136 million between FY2425 from ECWI and our adjustments to ECWI loss projections. Meanwhile, ECW is actively seeking new landbank opportunities. As at end-Jan 2024, net gearing was 0.28x (0.25x end-4QFY23) post the completion of its Kulai industrial land acquisition. Unbilled sales were RM3.8 billion as at end-Jan 2024 or 1.3x of our FY24E revenue.
We maintain BUY on ECW but raise TP to RM1.83 (+43sen) on a higher 1.1x FY24E PBV peg vs. 0.8x.