AmWatch - Eco World Development : Seeks clarification from state government, 25 Sep 2015

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Eco World Development : Seeks clarification from state government    Hold

We maintain our HOLD recommendation on Eco World Development Group with a fair value of RM1.60/share on an unchanged discount of 25% of its NAV/share.

The Star reported that Eco World will seek a meeting with the Selangor government to clarify certain matters that the latter had raised pertaining to its proposed acquisition of 2,198 acres of land in Kuala Selangor.

This could relate to an earlier statement issued by the Selangor Mentri Besar Inc (MBI) two days ago.

In its statement, MBI contended that the parcels of land that Eco World is proposing to buy actually relates to land located in the intended township of Alam Mutiara, which is currently the subject of ongoing court proceedings with the Selangor government.

Another report by The Edge said that part of the land parcels may be involved in ongoing legal proceedings, including 14 pieces of land that Eco World is acquiring from Mujur Zaman Sdn Bhd, one of the land’s vendors.

According to the report, these tracts have a combined size of 1,314 acres or approximately 60% of the total size of the land that Eco World is buying.    

Meanwhile, The Star report further quoted Eco World as saying that the planned land purchase is still conditional.

Eco World explained that it believed the land referred to by MBI could be a separate parcel located to the north of the parcels that Eco World is proposing to acquire.

All said, we believe the latest development could be an unwanted distraction in Eco World’s efforts to develop the land.

Furthermore, while its long-term potential is intact, we expect the project to take more time to mature as it is situated in a young growth corridor compared with its other townships in more established areas to the South East West (EcoMajestic) and South West (Eco Sanctuary) of the Klang Valley.

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