Total sales from Malaysian projects for the financial year exceeded RM3.1bil with more than RM2.2bil achieved in the second half of the year.
KUALA LUMPUR: Kenanga Research said Eco World Development Group's FY17 core net profit missed market expectations but came within 98% of its full-year estimates.
The research firm has maintained Market Perform on the counter with a lower target price of RM1.60.
"While FY17 sales performance was impressive even with the challenging landscape, demonstrating ECOWLD’s strong abilities and branding, we believe that investors may be less excited given that sales trajectories are weaker next year," it said.
Kenanga Research said 4Q17 core net profit rose 22% on-quarter as billings kick in from ongoing projects with revenue increasing 18% while EBIT margins are stable at 10%.
On-year FY17 core net profit declined 13% despite 15% topline growth as it was hit with higher finance costs from the equity financing of Eco World International/associate projects whose interest costs cannot be capitalised and related start-up costs.
The research firm said Eco World is targetting local sales of RM3.5bil in FY18E while Eco World International is targetting RM2bil in sales.
"Emphasis will be on execution and township occupancy in FY18 while landbanking news is likely to be quieter. Eco World International has also entered into a proposed 70% JV with Wilmott Dixon to develop 12 sites via two acquisitions stages, with Stage 1 consideration of GBP64.96m (RM356.3m) has a GDV of GBP1.09b (RM5.97b)."
Kenanga Research added that unbilled sales of RM6.4bil provides two to three years' earnings visibility. It conservatively assumes that dividend payouts will only commence in FY19, although management indicated it could happen in FY18.
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