ECO World Development : Reaping strong sales from new launches Buy

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ECO World Development : Reaping strong sales from new launches         Buy

We resume our coverage on Eco World Development with a BUY call (from HOLD), with a higher fair value of RM1.67, based on a 20% discount to its RNAV. Eco World's 1QFY17 core net profit of RM21.4m (+3.4% YoY) came in below our expectations, making up 8% of our full-year forecast and 13% of consensus. The growth in earnings was consistent with a 27.9% YoY growth in revenue to RM592.7mil. There was no dividend declared as expected. The growth in Eco World’s revenue and earnings was contributed by ongoing projects in the Klang Valley, Iskandar Malaysia and Penang.  Amidst the still challenging domestic property environment, Eco World managed to record strong growth in its property sales in 1QFY17. Its 1QFY17 new sales jumped 107% YoY to RM849.6mil. YTD, its total new sales from its Malaysian projects until end-February 2017 grew 57% YoY to RM955mil.

Eco World’s unbilled sales stood at RM4.96bil as at end-February 2017, relatively flat from end-4QFY16. As for its 25%-associate Eco World International (EWI), Eco World’s share of EWI’s unbilled sales stood at RM1.37bil as at end-February 2017, higher than the RM1.13bil as at end-4QFY16. The strong unbilled sales should secure Eco World’s earnings visibility for the next 2-3 years. Eco World is launching its Eco Horizon township in 2H2017, its largest township development in Penang with a total GDV of RM7.8bil, which we expect will increase its sales activities in the northern region. With new sales contribution from this project and continued momentum from its other projects, we expect Eco World to achieve its total sales target of RM4bil total sales in Malaysia in FY17. 

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