The research house said on Friday the 1H19 core net profit improved by 31% yoy despite weaker revenue (-3% yoy), as the majority of newly launched projects are undertaken by various joint ventures (JV).
Contribution from JVs, namely Eco Grandeur, Eco Horizon, Eco Ardence, and Bukit Bintang City Centre (BBCC), rose to RM40.4m in 1H19 vs. -RM2.6m in 1H18.
CIMB Research said the 1H19 new property sales came in lower at RM806m vs. RM923m in 1H18, but has increased significantly vs. 4M19 new property sales of RM230m.
The marked improvement of c.RM600m sales was due to the official launch of the National Home Ownership Campaign (HOC) in March 2019, coupled with the group’s Help2Own (H20) and Stay2Own (S20) solutions under its own HOPE campaign (Home Ownership Programme with EcoWorld). The seven months new property sales stood at RM1bn.
“The recent proposed JV with PowerChina Group to jointly develop Eco Business Park V and jointly bid for infrastructure projects in Malaysia is positive, in our view.
“We believe this could enable EWDG to tap into the expertise of PowerChina Group to venture into infrastructure projects, which will likely be another revenue stream for the group in the future. However, we gathered that the collaboration is still in the early stages and the two companies have yet to decide on which projects to bid for.
“Maintain our Hold rating on EWDG given: (i) its lower average new sales target of RM3bn p.a. (two-year sales target of RM6bn for FY19-20F), (ii) slower earnings growth in FY19-20F vs. FY18 and (iii) soft property outlook due to affordability issues, slowing GDP growth, and restrictive government policies. Unbilled sales stood at RM6.1bn as at end-May 2019, translating to 2.8x FY18 revenue. Our TP is revised to RM0.91 after updating our RNAV computation on land value.
“We fine tune our FY19-21F EPS forecasts to reflect the changes in project development timeline. Better-than-expected sales are a key upside risk to our Hold call while the key downside risk is deterioration in local property market sentiment,” it said.
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