STOCK FOCUS OF THE DAY
Eco World Development : On track to meet RM3bil domestic sales target HOLD
We maintain HOLD on Eco World Development with a fair value of RM1.46/share, based on a 20% discount to RNAV. It posted a 3QFY16 net profit of RM44.6mil (+29% QoQ, +375% YoY) - for a 9M total of RM99.9mil (+312% YoY). The result was achieved on the back of progress billings on projects launched with cumulative sales of RM6.2bil over the last two years. It also reflected 9 months' recognition vs. 7 months previously for the projects arising from the acquisition of development rights. For the 10-month period to Aug 2016, it achieved sales of RM2.2bil, 7% lower than RM2.37bil posted a year earlier. Of these, RM1.19bil came from the Klang Valley, RM935mil from Iskandar Malaysia and RM73mil from Penang.
The group is sticking by the sales target of RM4bil, including RM3bil domestic sales, based on the locked-in sales up to 31 Aug 2016. Unbilled sales amounted to RM4.7bil as at end-Aug vs. RM4.5bil as at end-May. Eco World expects sales in 4QFY16 to be boosted by the recent launches of Eco Ardence, Eco Grandeur, EBP II and Eco Bloom @ EcoMeadows as well as the imminent launch of Bukit Bintang City Centre's (BBCC) strata offices and serviced apartments. For the recent four concurrent launches on 25 Sept 2016, ~RM1bil worth of properties were offered, and the indicative take-up was ~81% representing over 1,000 units. Meanwhile, discussions among Eco World, its chairman Tan Sri Liew Kee Sin and another property development group to co-anchor Eco World International Bhd's (EWI) proposed IPO as strategic investors are targeted to be concluded soon.
It will then seek shareholders' nod for the subscription of up to 30% of EWI’s enlarged share capital. EWI’s three projects in London and one in Sydney have posted cumulative sales of GBP958mil as at 31 Aug 2016. Also ahead, Eco World is proceeding with its proposed private placement of 591.07mil shares, representing up to 25% of its existing paid-up capital. Half (RM389mil) of the proceeds (RM768mil) will go towards paying for the EWI subscription.
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