Eco World Development: A Deep Dive into a Promising Future

Date: Friday, 13 December 2024

Broker: UOB Kay Hian

Introduction

Eco World Development Group, a prominent property developer with significant exposure in the Klang Valley, Iskandar Malaysia, and Penang, has recently reported its results for the fourth quarter of the fiscal year 2024. This detailed analysis explores their remarkable performance, forecasts, and strategic outlook, providing investors with a comprehensive understanding of the company’s current standing and future potential.

Performance Overview

Eco World Development Group (ECW) has maintained its “BUY” recommendation, showcasing a robust performance in its latest fiscal quarter. The company’s share price stands at RM2.00, with a target price of RM2.37, indicating an 18.5% upside from the previous target price of RM2.10. ECW’s 4QFY24 core net profit exceeded expectations due to a higher-than-anticipated EBIT margin and substantial contributions from joint ventures (JVs).

Record-Breaking Sales and Profit

In FY24, ECW achieved an all-time high property sale of RM4.07 billion, surpassing both the company’s target of RM3.5 billion and the previous forecast of RM3.8 billion. This remarkable achievement was driven by significant industrial plot land sales from QUANTUM Edge, valued at RM626 million. The sales were predominantly led by Iskandar Malaysia in Johor, followed by the Klang Valley and Penang. Additionally, ECW declared a dividend of 2 sen for 4QFY24, bringing total dividends for the fiscal year to 6 sen.

Financial Highlights

ECW’s highest ever 4QFY24 core net profit was RM122.3 million, marking a 37% increase quarter-on-quarter and a 40% increase year-on-year. The company’s FY24 core net profit reached RM354.2 million, exceeding consensus expectations. This was largely attributed to cost savings from completed phases and contributions from JV projects like Eco Grandeur, Eco Ardence, and Eco Horizon. Furthermore, ECW has set a conservative FY25 sales target of RM3.5 billion, with expectations to surpass this, driven by strong business momentum and industrial plot sales.

Strategic Forecast and Valuation

Looking forward, ECW is poised for higher sales in FY25, with a forecast of RM4.2 billion facilitated by robust momentum across all business segments. The company’s recent acquisition of land for QUANTUM Edge has a gross development value (GDV) of RM1.58 billion, reflecting an anticipated price appreciation. ECW is also expected to see an improvement in margins, with an EBIT margin projected to expand to 20% from 19% in FY24.

Environmental, Social, and Governance (ESG) Initiatives

ECW is committed to sustainability and has made significant strides in its Environmental, Social, and Governance (ESG) initiatives. The company reduced its greenhouse gas emissions by 36% in FY22. Additionally, 100% of its suppliers for building materials and main contractors are local, supporting community engagement and local economic growth. ECW also maintains good company transparency through its Anti-Bribery and Anti-Corruption Policy.

Conclusion

Eco World Development Group’s strategic focus on expanding its landbank and increasing gross development value, coupled with its strong sales performance and commitment to sustainability, positions it well for future growth. With a “BUY” recommendation and a target price of RM2.37, ECW presents a promising investment opportunity for those looking to capitalize on the property development sector’s potential.