Eco World Development Bhd (ECW) has delivered a strong performance in 3QFY24, surpassing expectations with a core net profit of RM89.2 million, reflecting a 24% quarter-on-quarter (qoq) and 34% year-on-year (yoy) increase. This was achieved on the back of revenue of RM526 million, which, despite a 5.3% qoq dip, represents a 10.4% yoy growth. For the nine-month period ending FY24 (9MFY24), the company recorded a net profit of RM231.9 million, which is a 25% increase compared to the previous year, surpassing both internal and consensus forecasts.
Key Financial Metrics:
- Revenue Growth: Revenue for 9MFY24 stands at RM1.62 billion, a 17.2% yoy increase.
- Net Profit: Core net profit for 9MFY24 hit RM231.9 million, a significant 24.6% increase.
- Earnings Before Interest and Taxes (EBIT): ECW’s EBIT margin improved to 24.5% in 3QFY24 from 21.5% in 3QFY23.
- Unbilled Sales: The company’s unbilled sales have grown to RM4.5 billion with a cover ratio of 2x, an increase from RM4 billion in the previous quarter.
- Cash Reserves: ECW has reached a record-high cash reserve of RM1.5 billion by 9MFY24, alongside a reduced net gearing ratio of 0.21x.
- Dividends: ECW declared a dividend of 2 sen per share for 3QFY24, bringing total dividends to 4 sen for the year, matching FY23’s payout.
Sales Performance:
- Total Sales: ECW has secured RM3.503 billion in property sales for the 10 months ending FY24, exceeding its full-year sales target of RM3.5 billion. Sales are driven primarily by strong performances in the Johor region and the Klang Valley.
- Johor: The region accounted for 63% of total sales, amounting to RM2.21 billion, primarily driven by projects like Eco Botanic.
- Klang Valley: Sales amounted to RM931 million, representing 27% of total sales, with key contributors being Eco Grandeur and Eco Ardence.
- Eco Rise: This revenue stream contributed RM909 million from sales of Duduk apartments (85% of Eco Rise’s sales).
Industrial Segment:
- ECW has made significant strides in the industrial segment, securing RM1.05 billion in sales, surpassing the previous year’s full-year industrial sales. Major deals included the sale of 123 acres to Microsoft for RM402 million and 57 acres to Princeton Digital for RM224 million. These deals reflect increasing demand for industrial space, particularly for data centres.
Outlook and Strategy:
- Sales Forecast: ECW has indicated that it may not aggressively pursue a higher sales target in the remaining months of FY24, having already achieved its full-year target. Sales for FY24 are forecasted to reach RM3.8 billion, reflecting a 6% yoy growth.
- Landbank Expansion: ECW remains focused on expanding its landbank and aims to close one more land deal by year-end.
- BBCC Project: The company is prioritizing the expansion of its commercial presence at the Bukit Bintang City Centre (BBCC) before launching high-end residential units. Demand is being driven by interest from buyers from Taiwan, China, and Hong Kong through the Malaysia My Second Home (MM2H) program.
- Commercial Sales: In Johor, demand for commercial properties is strong, to the point that prospective buyers are now required to first purchase residential products before being eligible to buy commercial offerings.
Earnings Revision and Valuation:
- Earnings Revisions: ECW has increased its net profit forecasts by 6-12% for FY24-FY26, driven by higher revenue and improved margins, particularly in the Johor region.
- Target Price: The company’s target price has been raised to RM2.10, based on a 40% discount to its Real Net Asset Value (RNAV) of RM3.50 per share. This implies a forward price-to-earnings (PE) ratio of 16-20x for FY24-FY26, which is lower than its 10-year average of 32x.
Environmental, Social, and Governance (ESG) Efforts:
- Environmental: ECW reduced its greenhouse gas (GHG) emissions by 36% in FY22, demonstrating its commitment to sustainability.
- Social: All of ECW’s suppliers and contractors are local, supporting domestic businesses.
- Governance: The company adheres to transparency and has established an Anti-Bribery and Anti-Corruption Policy, further cementing its strong governance practices.
Conclusion:
EcoWorld Development continues to perform strongly, exceeding sales targets and showing resilience in a competitive market. With strong financials, robust sales growth, and a focus on expanding its landbank and industrial space offerings, ECW remains a leading player in the Malaysian property market. The company’s strategic moves, particularly in the Johor region and industrial segment, position it well for continued growth into FY25 .
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