Eco World Development: A Strategic Collaboration and Financial Outlook

Date: December 19, 2024

Broker: Maybank Investment Bank Berhad

Introduction

Eco World Development (ECW MK) has strategically positioned itself in the Malaysian real estate market with an innovative approach to property development. This comprehensive analysis delves into the significant Memorandum of Understanding (MOU) signed with SD Guthrie and NS Corporation, as well as a detailed financial outlook and ESG considerations.

Strategic Partnership with SD Guthrie

Eco World Development’s recent MOU with SD Guthrie (SDG MK) and NS Corporation marks a pivotal development in creating a 1,166-acre industrial park in Negeri Sembilan. This park forms part of the Malaysian Vision Valley 2.0 (MVV2.0) and is strategically located near Kuala Lumpur International Airport (KLIA). It aims to host industrial lots, ready-built factories, and commercial properties, all designed to cater to high-growth sectors like aerospace, electronics, logistics, and biotechnology. This collaboration is expected to span eight years with a total gross development value (GDV) of MYR2.9 billion.

Financial Outlook and Earnings Forecast

Despite the ambitious scope of the MOU, Eco World Development maintains its earnings forecasts, upholding a target price of MYR2.25 (1.3x FY25E P/B). The strategic partnership offers a dual advantage: leveraging SDG’s extensive landbank and enhancing ECW’s brand influence and track record. This collaboration is expected not only to replenish ECW’s diminishing landbank but also to extend its industrial property segment presence into Negeri Sembilan, paving the way for future partnerships.

Market Performance and Valuation

Eco World Development’s stock performance reflects a robust trajectory with a current price of MYR1.99 and a 12-month target price of MYR2.25, indicating a potential 13% uplift. The company’s market capitalization stands at MYR5.9 billion with a free float of 32.9%. The share price has shown significant growth with a 97% absolute increase over the past year and an 81% rise relative to the index.

Environmental, Social, and Governance (ESG) Commitment

Eco World Development is committed to sustainable development and has embedded ESG principles across its operations. The company has maintained its position in the FTSE4Good Bursa Malaysia (F4GBM) Index since 2020, with a proprietary ESG score of 69/100. ECW has actively pursued environmental initiatives, such as installing electric vehicle charging stations and achieving green certifications for 89% of its projects. The company also focuses on repurposing construction materials to reduce waste and has designated 22% of its development areas as green spaces.

Corporate Governance and Social Impact

Eco World’s corporate governance structure includes a diverse board with 36% female representation and a strong focus on anti-corruption policies aligned with the Malaysian Anti-Corruption Commission Act 2009. The company reported zero cases of corruption in FY23 and has an active Students Aid Programme supporting over 1,800 students. Additionally, Eco World Development invested MYR2.7 million in corporate social responsibility initiatives, including aid for schools and flood relief efforts.

Quantitative and Qualitative ESG Metrics

The company demonstrates strong quantitative and qualitative metrics, with a commitment to reducing Scope 2 GHG emissions by 20% by 2025. Eco World has achieved significant milestones in employee satisfaction and training, boasting a satisfaction score of 98% and providing an average of 26 training hours per employee. The company’s sustainability committee, established in 2017, oversees these ESG initiatives.

Conclusion

Eco World Development stands out as a leading property developer in Malaysia with a strong focus on strategic partnerships, sustainable growth, and robust financial performance. With the ongoing collaboration with SD Guthrie and continued commitment to ESG principles, Eco World is poised for significant growth and long-term value creation in the Malaysian property market.