It said on Friday that at RM1.33, this was 23% below is fully diluted sum-of-parts of RM1.72 which includes gross development value (GDV) replenishments of RM8bil.
“Our applied discount is considered an industry low given that its existing projects have achieved strong take-up rates while we believe their GDV replenishments can be easily launched quickly given their strong execution capabilities,” it said.
To recap, the EWI IPO will raise RM2.58bil based on 2.15 billion shares at a retails IPO of RM1.20 out of the enlarged share base of 2.40 billion shares, implying a market capitalisation of RM2.88bil, which it deems as large cap developer.
The IPO comes with a bonus warrant issue of up to 960 million. Utilisation of proceeds is mainly for debt repayment, working capital and future land acquisitions.
Key shareholders are Tan Sri Liew Kee Sin (10.3%), Eco World Development Group Bhd (27.0%) and Guocoland (27.0%).
Leading the management team are Liew (executive vice chairman) and Datuk Teow Leong Seng (ED/president & CEO) who are known for previously managing SP Setia.
Guocoland is part of Hong Leong Group and a strong regional player with established presence in London. Under the shareholder's agreement, Guocoland has priority to be a project partner if EWI requires a partner to undertake any developments in China, Singapore and UK.
EWI projects will be marketed under the“EcoWorld” brand. Total GDV of RM13bil of which 92% are in London, which are a 75:25 JV between EWI and Ballymore while the remainder is in Australia.
Their projects have achieved rapid take-ups backed by strong local buyers. The London and Australia projects have secured 60% and 80% pre-sales (Jan 31, 2016) since the launch in 2015 amounting to RM6.5bil.
The bulk of buyers are largely locally driven with London seeing 54% local buyers while Australia sees 49% which indicates strong sales sustainability.
Expect maiden bullet earnings contributions by FY18 at RM165mil with stronger growth in FY19E of RM552mil based on its estimated FY17, FY18 and FY19 cumulative sales of £1.55bil, £2.11b and £2.34b, respectively.
“We expect investors to look beyond FY17, which is expected to still be in the red as their projects are only be recognised upon completion. Note that their London projects are recognised at share of JV levels resulting in no visible revenue until West Village is completed. No dividends are expected at this juncture.
“EWI will be in a net cash position post IPO and debt repayment. The group is likely to embark on more JV structures like Ballymore group to avoid over taxing its balance sheet while allowing for rapid expansions.
“Furthermore, considering how fast EWI has secured the earlier four projects, we estimate GDV replenishments of RM8bil over the next 12-18 months,” it said.
Did you find this article insightful?