Comprehensive Analysis of Eco World Development and Notable Transactions

Broker Name: Maybank Investment Bank Berhad

Date of Report: February 18, 2025

Eco World Development (ECW MK): A Deal Maker Amid Market Uncertainty

Eco World Development (ECW) has proven its capability as a deal maker despite global market uncertainties. The company recently entered into a conditional Sales and Purchase Agreement (SPA) with Microsoft Payments for the sale of 138.5 acres of freehold industrial land in Eco Business Park I (EBPI), Iskandar Malaysia. The transaction, valued at MYR694 million (or MYR114 per square foot), not only accelerates ECW’s asset monetization process but also strengthens its financial position. This land sale is expected to conclude by the first half of calendar year 2026.

Strategic Land Sales

Within just eight months, ECW has secured three data center-related land deals worth a combined MYR1.3 billion, accounting for 38% of its total industrial sales between FY2021 and FY2024. This latest sale to Microsoft is particularly noteworthy as the price per square foot is 52% higher than a previous sale to Microsoft in Kulai (MYR75 psf), highlighting the strategic value of its Tebrau location.

Financial Adjustments

Following this deal, ECW has revised its earnings forecasts for FY2025 to FY2027. Revenue for FY2025 is projected to be MYR2.96 billion, with further growth to MYR3.58 billion and MYR3.81 billion in FY2026 and FY2027, respectively. The company’s net gearing is expected to decline to 0.20x post-land sale from 0.25x, positioning ECW for future landbank expansion and sustainable earnings growth.

Recommendation

The research team maintains a BUY rating for ECW with a 12-month price target of MYR2.34, reflecting a 27% upside from its current share price of MYR1.84.

Notable Transactions for Data Centers in Johor

The report also highlights notable land transactions in Johor, emphasizing the region’s growing importance as a data center hub. Key deals in 2023 and 2024 include transactions by Crescendo Corporation (CCDO MK), AME Elite, UEM Sunrise (UEMS MK), and Tropicana Corporation (TRCB MK).

Microsoft and Other Buyers

Microsoft Payments acquired multiple parcels of land, including 60.4 acres in Pulai for MYR315.2 million (MYR120 psf) and 25.3 acres in Pulai for MYR132.5 million (MYR120 psf). Other notable buyers include Digital Hyperscale Malaysia, which purchased 35 acres in Iskandar Puteri for MYR210.3 million (MYR138 psf), and ZData Technologies, which acquired 38.5 acres in Iskandar Puteri for MYR240 million (MYR143 psf).

Reinforcing Johor’s Position

These transactions underscore Johor’s emergence as a key hub for data centers, driven by strategic locations and competitive pricing.

Eco World Development: Financial and Operational Metrics

ECW’s financial performance continues to be robust, supported by its diversified portfolio and strategic land sales. The company reported a revenue growth of 31.3% in FY2025 with EBITDA margins of 20.4%. Core net profit is expected to grow by 24.6%, reaching MYR431.7 million.

Balance Sheet Strength

As of FY2025, ECW’s total assets are projected at MYR9.88 billion, with total liabilities at MYR4.73 billion. Shareholders’ equity is estimated at MYR5.14 billion, reflecting a solid financial footing.

Environmental, Social, and Governance (ESG) Initiatives

ECW is a constituent of the FTSE4Good Bursa Malaysia Index and scores 69/100 on Maybank’s proprietary ESG assessment. The company has demonstrated leadership in sustainability initiatives, including green certifications for 89% of its projects, installation of electric vehicle charging stations, and waste management strategies that repurpose construction materials. ECW also achieved zero workplace fatalities and contributed MYR2.7 million to community programs in FY2023.

Risks and Challenges

Potential risks include a prolonged slowdown in the property sector, regulatory changes, and higher operating costs. However, ECW’s diversified portfolio and strategic focus on high-growth regions mitigate these risks.

Recommendation

The research team reiterates a BUY rating for ECW, supported by its strong fundamentals and strategic initiatives.

Conclusion

Eco World Development continues to demonstrate resilience and strategic foresight in navigating market uncertainties. Its recent land sales, financial performance, and ESG initiatives position the company for long-term growth. With a 12-month price target of MYR2.34, ECW remains a compelling investment opportunity.