KUALA LUMPUR: Despite a promising start to its financial year, Eco World Development Group Bhd
(EcoWorld Malaysia) could be facing slowing sales for the remainder of the year as analysts anticipate a weaker sales performance ahead.
In a recent statement, the property group said sales in 4MFY22 jumped 40% y-o-y to RM1.275bil, which represented 36% of management's full-year sales target.
Kenanga research said in a report the sales performance came to 38% of its own full-year forecast but deemed it within estimate as sales are expected to be less robust for the remainder of FY22.
It said this is owing to anticipated interest rate hikes in the second half of 2022 and the absence of the government's Home Ownership Campaign.
In addition, EcoWorld Malaysia's management has guided that most of its launches have been made in 1QFY22, with fewer launches remaining for the rest of the year.
In 1QFY22, the EcoWorld Malaysia posted a core net profit of RM63.4mil, which was flattish year-on-year (y-o-y) and within Kenanga's and consensus expectations at 27% and 28% of full-year estimates.
Meanwhile, rising sales assumptions from Eco World International Bhd could have a negligible impact on bottomline as they would likely translate into minimal gross profit margins, said Kenanga.
According to the research firm, the aggressive drive for sales by Eco World International's 75%-owned joint venture EcoWorld Bailymore would likely yield minimal gross profit margins and consequently break even the bottomline.
"Eco World International’s 4MFY22 sales of RM0.685b (3MFY22 sales was RM0.428b) is within management’s RM2.0b target but above our RM1.5b target as further incentives were provided to boost sales – which means margins will be compromised," said the research house.
"Hence, despite raising Eco World International’s sales assumption to RM2.0b (from RM1.5b), we keep FY22-23E earnings unchanged," it added.
Kenanga maintained "market perform" on EcoWorld Malaysia and its target price of 85 sen.
Meanwhile, MIDF Research said in its report that it maintained its "neutral" recommendation on EcoWorld Malaysia with a higher target price of 91 sen as it narrowed its real net asset value discount to 60% from 65% due to stable new sales prospects.
It noted that despite the positive sales outlook for FY22, it expects the earnings outlook to be flattish.
(EcoWorld Malaysia) could be facing slowing sales for the remainder of the year as analysts anticipate a weaker sales performance ahead.In a recent statement, the property group said sales in 4MFY22 jumped 40% y-o-y to RM1.275bil, which represented 36% of management's full-year sales target.
Kenanga research said in a report the sales performance came to 38% of its own full-year forecast but deemed it within estimate as sales are expected to be less robust for the remainder of FY22.
It said this is owing to anticipated interest rate hikes in the second half of 2022 and the absence of the government's Home Ownership Campaign.
In addition, EcoWorld Malaysia's management has guided that most of its launches have been made in 1QFY22, with fewer launches remaining for the rest of the year.
In 1QFY22, the EcoWorld Malaysia posted a core net profit of RM63.4mil, which was flattish year-on-year (y-o-y) and within Kenanga's and consensus expectations at 27% and 28% of full-year estimates.
Meanwhile, rising sales assumptions from Eco World International Bhd
could have a negligible impact on bottomline as they would likely translate into minimal gross profit margins, said Kenanga.According to the research firm, the aggressive drive for sales by Eco World International's 75%-owned joint venture EcoWorld Bailymore would likely yield minimal gross profit margins and consequently break even the bottomline.
"Eco World International’s 4MFY22 sales of RM0.685b (3MFY22 sales was RM0.428b) is within management’s RM2.0b target but above our RM1.5b target as further incentives were provided to boost sales – which means margins will be compromised," said the research house.
"Hence, despite raising Eco World International’s sales assumption to RM2.0b (from RM1.5b), we keep FY22-23E earnings unchanged," it added.
Kenanga maintained "market perform" on EcoWorld Malaysia and its target price of 85 sen.
Meanwhile, MIDF Research said in its report that it maintained its "neutral" recommendation on EcoWorld Malaysia with a higher target price of 91 sen as it narrowed its real net asset value discount to 60% from 65% due to stable new sales prospects.
It noted that despite the positive sales outlook for FY22, it expects the earnings outlook to be flattish.
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