PETALING JAYA: Eco World Development Group Bhd (EcoWorld Malaysia) aims to strike a balance between distributing dividends and securing land assets for future developments.
Following an engagement with the property developer, Maybank Investment Bank (Maybank IB) Research said the group is seeking to sustain a dividend per share at a level equal to or greater than that of the financial year ending on Oct 31, 2022 (FY22).
In FY22, the group declared a dividend of five sen per share and notably, for the first nine months of FY23 concluded on July 31, 2023, the group has already declared a dividend of four sen per share.
Additionally, the research house noted that the group is proactively exploring new opportunities for land acquisition within the Klang Valley and Iskandar Malaysia, particularly for township and industrial projects.
“EcoWorld Malaysia is continuing its efforts to replenish its land bank even after its recent acquisitions in Kajang, 6.9 acres for apartments with RM500mil gross development value (GDV), and Kulai, 404 acres industrial park with RM1.6bil GDV,” the brokerage noted.
Maybank IB Research noted that the group is looking for land in the preferred size range of between 200 and 300 acres for its upcoming acquisition.
“The land should be located in either the Klang Valley and Iskandar Malaysia, offering both township and industrial property products,” it added.
The research firm said EcoWorld Malaysia has received the first interim dividend from its 27%-associate, Eco World International Bhd (EWI).
This dividend is expected to decrease EcoWorld Malaysia’s net gearing from 0.31 times at the end of the third quarter ended July 31, 2023 to 0.27 times, excluding new debt associated with its Kajang and Kulai land deals.
Consequently, this will provide debt headroom amounting to about RM1.1bil, aligning with EcoWorld Malaysia’s internal net gearing target of 0.5 times.
“Additionally, EcoWorld Malaysia will benefit from another bumper dividend from EWI in December 2023.
“This will further reduce its net gearing to 0.26 times,” Maybank IB Research added.
The research house further noted that EcoWorld Malaysia will prioritise profitability over sales in the short term, anticipating new project launches by the end of FY24 or early FY25.
Moreover, the research house highlighted that the profit margin for EcoWorld Malaysia is unlikely to be diluted by new projects.
This optimism is grounded in the group’s targeted efforts to achieve enhanced profits from its matured townships.
“As all its township projects are maturing, EcoWorld Malaysia can now price its products higher, especially the landed residential units.
“While its new projects in Kulai and Kajang may bring in lower margins initially due to upfront infrastructure costs, the blended group margin should remain stable or be even higher, contributed by its matured township developments,” it added.
Maybank IB Research, without revising its earnings forecasts, has maintained a “hold” recommendation on EcoWorld Malaysia, keeping the target price unchanged at RM1.12 per share.