Eco World’s earnings forecast raised

CGS-CIMB felt that the FY20 sales target was achievable, given the good sales momentum and effective digital marketing initiatives.

PETALING JAYA: Eco World Development Group Bhd has had stronger-than-expected progress billings, better gross margins and faster construction progress in the third quarter. And analysts have raised the group’s earnings forecast.

UOB Kay Hian revised its financial year 2020 (FY20) earnings forecast by 44.2%, while Maybank IB Research raised its forecast by 24%.

“Including the en bloc sales for a serviced residence tower at Bukit Bintang City Centre, Eco World’s locked-in property sales for the first 10 months of FY20 were RM1.58mil, accounting for 79% of its FY20 sales target of RM2bil.

“Given the good response on its ‘Duduk’ campaign, the management is confident of achieving its FY20 sales goal, ” said Maybank IB Research, adding that Eco World’s earnings are likely to be stronger in the fourth quarter of FY20 as construction work returns to normal after the movement control order (MCO).

CGS-CIMB felt that the FY20 sales target was achievable, given the good sales momentum and effective digital marketing initiatives.

As at end-August 2020, Eco World’s unbilled sales amounted to RM4.4bil, compared with RM5.9bil during the same period last year, largely due to the impact of the MCO.

Eco World registered a core net profit of RM79.2mil in the third quarter of FY20, bringing its nine-month core net profit to RM134.1mil, which surpassed consensus’ expectations.

The property developer’s net profit of RM79.2mil in the third quarter has been adjusted for RM65mil of inventory write-down.

Eco World aims to focus on the housing needs of the M40 market, with residential properties ranging from RM500,000 to RM900,000.

The group targets to launch its new product, a high-rise apartment named ‘Duduk’ in Setia Alam in the fourth quarter of FY20.

The apartment will be launched in phases with total gross development value (GDV) expected to be around RM900mil, priced at about RM400,000 for 1,000 sq ft.

Moving into the first quarter of FY21, EcoWorld will launch Eco Botanic 2 township in Iskandar Malaysia.

Meanwhile, Eco World’s associate company EcoWorld International Bhd (EWI) planned to secure at least one en bloc sale in FY20.

“EWI has secured new property sales of RM1.1bil in the first 10 months of FY20, which is just 49% of its FY20 sales target of RM2.2bil.

“The slower sales were due to the lack of en bloc sales of build-to-rent units (BtR) after the lockdown in the UK, which has affected the negotiation progress for BtR deals, ” said Maybank IB Research.

Excluding foreign exchange loss of RM8.9mil, EWI reported a core net profit of RM46.5mil in the third quarter of FY20, representing a 5.3% year-on-year (y-o-y) decline.

This lifted core earnings for the nine months of FY20 to RM67mil by an increase of 12% y-o-y, accounting for 48% of consensus full-year estimates.

According to Maybank IB Research, the variance in EWI’s earnings was due to slower-than-expected completion and hand over of Wardian units in London. Half of the Wardian units are expected to be handed over in FY20, with the remaining in FY21.

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