Kenanga Research said EcoWorld’s financial outlook remains positive.
PETALING JAYA: Eco World Development Group Bhd
(EcoWorld), which has expanded into data centres, has been upgraded to a “market perform” with a RM2 target price by Kenanga Research.
The research house previously had a target price of RM1.40 on the property-development group.
The research house said that since its most recent coverage last August, EcoWorld had expanded into data centres with the sale of 58.1 acres of land and the signing a of build-and-lease deal in Eco Business Park V in Selangor.
“The land sale boosted its cash, adding to recent land sales, while the build-and-lease deal builds up recurring income.
“We have updated our sum-of-parts valuation while also upgrading EcoWorld’s earnings forecast for this year by 22% in line with its stronger sales outlook.
“We are also applying a narrower net asset value discount,” said Kenanga Research said in a report yesterday.
The research house said the earnings revision was driven by the company’s strong results last, which beat its full-year forecast by 20% as sales exceeded the group’s target of RM4.1bil by 16%.
Last month, EcoWorld announced its expansion into data centres with the signing of two agreements with Pearl Computing Malaysia Sdn Bhd.
The group’s subsidiary, Paragon Pinnacle Sdn Bhd, disposed of a 58.1 acres leasehold industrial land for RM266.1mil or RM105.2 per sq ft.
According to Kenanga Research, the price for the deal is significantly above the typical range of RM28 per sq ft to RM80 per sq ft for industrial land in Johor, highlighting the strategic value of the location and the strong demand for high-quality industrial land.
Another subsidiary, Quantum Alpha Sdn Bhd, signed a build-and-lease agreement to construct and lease the shell and core for data centres on 92.4 acres of land in Eco Business Park V.
The project, set for completion by 2027, has a 20-year initial lease term with a 10-year renewal option.
Additionally, the total rent payable by the lessee over the term is estimated to reach up to RM4.8bil or RM240mil per year.
The research house said the completion of the deals will strengthen the group’s cash position, including its short-term funds, which totalled RM1.36bil as of the end of last year.
“Since last year, the group has successfully completed four significant industrial land sales, generating a combined total of RM1.6bil in proceeds.
EcoWorld’s financial outlook remains positive, supported by its ability to unlock strong asset value and secure stable, long-term income streams,” the research house said.
Beyond industrial sales, Kenanga said the group’s well-received township projects in the Klang Valley, focus on the affordable-housing segment, and exposure to the growing small and medium enterprise sector and rising foreign direct investment also strengthen its growth prospects.
“The stronger-than-expected demand is expected to carry into this year where the group’s conservative sales target of RM3.5bil is likely to be surpassed.
“We have forecasts of RM3.9bil in sales for this year.
“Meanwhile, we introduce our forecasts for next year with a slightly lower sales volume of RM3.8bil, pending clarity on EcoWorld’s longer-term project pipeline,” the research house said.
Kenanga Research said the assumptions have not factored in any earnings contributions from the build-to-lease agreement with Pearl Computing, which is due to commence in 2027.
Assuming it operates under net margins of about 50%, the research house said an additional RM120mil per year contribution would improve its earnings forecast by about one-third.
