PETALING JAYA: Eco World Development Group Bhd, which has seen its financial performance rebound in the third quarter of its current financial year, expects to hit its sales target of RM6bil over the 2019 and 2020 financial years after sales picked up this year.
President and CEO Datuk Chang Khim Wah said most of its sales so far for the current financial year have come in over the past six months and bolstered its sales over the 10 months of financial year 2019 (FY19) that is reaching close to RM2bil.
“Most of the sales came in over the last six months and based on the strong sales trajectory we have seen across all our projects, we believe we are on track to achieve our two-year sales target of RM6bil, ” he told StarBiz in a written interview.
Eco World Development set a two-year sales target of RM6bil for these financial years with the expectation that there would be a slight lull in the market until the Home Ownership Campaign was launched.
Better sales have lifted Eco World Development’s sales for the nine months of FY19 to RM1.55bil from RM1.52bil in the previous corresponding period. Its profit jumped strongly to RM122mil from RM80.7mil.
The profit in its third quarter was its strongest-ever quarterly performance minus exceptional items, and looking at consensus estimates, the group is projected to post a net profit of RM182mil for FY19 and RM215mil for FY20.
Future revenue from unbilled sales was RM5.8bil as of August 2019, which includes its 27% share of Eco World International Bhd’s (EWI) expected revenue. Eco World Development’s share of that amount is RM4.3bil.
“This provides very good near and mid-term earnings visibility. We will also be unveiling several new phase launches at our various projects to expand our product offerings and build on the success of the initial phases, which have been or will shortly be handed over, ” said Chang.
“These include Cora at Eco Ardence featuring semi-Ds and bungalows, as well as Regent Gardens at Eco Grandeur offering an exciting opportunity for customers to design their dream home.
“Other new phases to be launched with innovative ideas and concepts incorporated to appeal to the specific target customer group include the Hazelton at Eco Forest featuring the new Ergo Homes design, emphasising efficient space planning and communal living, and a new phase of Mellowood homes at Eco Majestic.
“Up north in Penang, Eco Horizon will be launching the Brydon collection of semi-Ds and bungalows, while down south in Iskandar Malaysia, Eco Spring will introduce Rosé, a new Garden Home series, inspired by the strong reception these products have received in the Klang Valley, ” he said.
With net gearing at 0.75 times, future sales from its unbilled progress billings will give rise to near- and mid-term earnings visibility and generate cashflow certainty for loan repayments.
With the six-year-old company generating cumulative sales of RM16.3bil, the bulk of its sales have been generated by projects in the central region which commanded 65% of that amount, or RM10.6bil.
Its business in the southern region generated 28% of revenue and Chang said Eco World’s projects in Johor are doing very well and have become highly established residential, commercial and business hubs in their respective localities.
“In less than six years, our projects in Iskandar Malaysia have achieved more than RM6bil sales. All our townships have crossed the RM1bil mark and our three business parks (Eco Business Parks I, II and III) have collectively sold more than RM1bil.
“Eco Botanic, our most matured township located right opposite Educity, is a hive of activity today, with residents and business owners from Singapore, China, South Korea, Hong Kong, etc, settling in happily alongside our core Malaysian customers.
“Eco Spring and Eco Summer, our twin-townships in the matured Tebrau corridor, is home to many upgraders, and the Spring Labs, featuring innovative retro-modern retail concept outlets, has attracted many interesting and new-to-market businesses to boost the vibrancy and commercial activity within the township. Similarly, Eco Tropics in Pasir Gudang has transformed township living in the Eastern Corridor of Iskandar Malaysia, ” he said.
Chang believes the property market is going through challenging times but that Malaysians should not lose sight of the bigger picture and the opportunities present.
“Property investment has also been proven over time to be the best hedge against inflation and is a long-term store of value. As such, there is always a market for good properties, ” he said.
It is these prospects that Eco World Development is looking to capitalise on. The group is sitting on 4,467 acres of land with a potential gross development value (GDV) of RM69.2bil.
For the projects launched more than three years ago, the occupancy of its residential and business parks is more than 90%.
“In this regard, our efforts over the years to build up the EcoWorld brand and deliver outstanding products as well as service quality have stood us in good stead and enabled us to record strong sales even in the midst of a soft property market, ” he said.
A similar picture for EWI is also forming, with the international arm of the Eco World group also expected to see an acceleration of profits over the next few years.
Profit for the nine months of FY19 was RM68mil and market expectations is for it to rise rapidly towards FY19 and FY20. Market estimates are that EWI would post a net profit of RM142mil for 2019 and RM342mil for 2020.
EWI president and CEO Datuk Teow Leong Seng said that on the sales front, EWI recorded RM773mil in sales for the first 10 months of FY19.
“The group’s projects in the UK generated RM686mil in sales, while those in Australia generated RM87mil. Mid-mainstream products for the London market priced from £500 per square foot (psf) to £800 psf continued to account for more than half of the sales achieved in this period, ” he said.
The occupancy rate of its London City Island project is 89% and its Embassy Gardens, 99%.
“Property market sentiment has also picked up in Australia following its federal election in May 2019. The market received a further boost in July 2019 when the Australian Prudential Regulation Authority, the financial sector regulator, relaxed mortgage lending guidelines which increased the mortgage capacity of home-buyers. There are signs that the Australian market has bottomed, as mortgage lending in July 2019 rose 15% compared to the preceding month, ” he said.
Teow said EWI is maintaining its sales target of RM6bil to be achieved over FY19 and FY20. Potential BtR (build to rent) deals in the UK that are being pursued by EcoWorld London with institutional investors are expected to be the key sales driver in these two financial years.
EWI is also helped by future growth prospects that include its presence in the mid-mainstream residential market which is supported by UK-based buyers.
EWI’s remaining GDV as at August 2019 was RM15.3bil, with 96% of this coming from the UK market.
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