KUALA LUMPUR: Earnings from EcoWorld International's (EWI) proposed JV with Willmott Dixon (WD) could come in earlier if the JV’s enbloc sale of its build-to-rent (BTR) units materialises, says Maybank Investment Bank Research.
It said on Tuesday this would be a positive as the proceeds can help to cushion new staff costs and marketing expenses for future projects.
“We estimate a +9 sen a share uplift to our realised net asset value (RNAV) estimate from the JV’s six development sites under stage 1. We maintain our earnings forecasts, RM1.10 RNAV target price and Hold rating,” it said.0
Maybank Research met with EWI management during Invest Malaysia 2018 last week.
Details on the six development sites (under a 70:30 JV with WD) are still lacking.
The JV’s initial acquisition of six development sites would be completed by February 2018, and it is looking to sell some BTR units there, enbloc to institutional buyers.
If this materialises, it would lighten EWI’s balance sheet as the sales proceeds can be progressive, as construction progresses.
This would help to cushion new staff costs and marketing expenses for the JV’s future projects. EWI may also be able to recognise earnings from the JV’s soon-to be-handed over units in 2018.
“EWI’s management is not looking to raise fund from the equity market in the near term, post-IPO listing in April 2017.
“Management prefers to fund EWI’s existing projects and new acquisitions via debt given that EWI’s balance sheet is very healthy with a cash pile of RM863mil as at end-October 2018 (36 sen net cash a share).
“Post the acquisition of the initial six development sites under its JV with WD, EWI’s outstanding GDV would increase to RM13bil (from RM6.5bil). EWI’s management is still actively looking for new landbank in Sydney and Melbourne.
“EWI has revised up its 2018 sales target to RM2.5bil (+25%; RM2bil from existing projects, RM500mil from new JV projects being its effective 70% stake).
“We have yet to incorporate the six development sites under its JV with WD into our financial model pending further details.
“Based on our back-of the-envelope calculation, we expect the six development sites under stage 1 to enhance our RNAV estimate by +9 sen a share,” it said.
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