CGSI Research said a key driver of growth will be EcoWorld’s built-to-lease data centre at Eco Business Park (EBP) V.
PETALING JAYA: Eco World Development Group Bhd
’s (EcoWorld) prospects appear promising, underpinned by its strategic focus on expanding its recurring income portfolio and capitalising on resilient sales growth.
The group aims to increase recurring earnings to contribute between 20% and 30% of total net profit within the next three to five years, a notable rise from the estimated RM10mil in profit after tax (PAT) from recurring income assets in the financial year ended Oct 31, 2024 (FY24), which accounts for only 4% of total earnings.
According to CGS International Research (CGSI Research), a key driver of this growth will be EcoWorld’s built-to-lease data centre at Eco Business Park (EBP) V, which is scheduled to commence operations by the end of FY27.
“We estimate that upon reaching full-year contributions in FY28, the data centre asset could generate about RM77mil in PAT per annum, pushing total recurring income contributions to over 15% of the group’s net profit,” CGSI Research noted.
The research house also highlighted EcoWorld’s positive earnings outlook for FY25 to FY27, supported by sustained sales growth and strong momentum in the industrial and data centre segments.
“We believe sales growth will be supported by ongoing land acquisitions in Iskandar Puteri, Kuala Langsat, Bukit Pelandok, and the recently acquired 847.3-acre Semenyih land,” CGSI Research stated.
Furthermore, the group is leveraging its established townships by launching more commercial products such as shop lots and offices, which typically yield higher profit margins.
Despite the group’s net gearing of 0.38 times as of January 2025, management appeared unperturbed by a potential temporary increase stemming from the consolidation of Eco Grandeur and EBP V’s debts, land acquisitions, and data centre capital expenditure (capex).
CGSI Research attributed this confidence to EcoWorld’s “strong cash flows from operations and upcoming land sale proceeds”.
Notably, the group’s data centre land sales are expected to bolster earnings, starting with the RM402mil sale to Microsoft from the second quarter of FY25.
This will be followed by three additional parcels valued at RM1.2bil to Princeton Digital Group, Microsoft, and Pearl Computing, beginning from FY26.
“We continue to see EcoWorld as a key beneficiary of the growing Johor property market, supported by its extensive landbank of over 1,000 acres in the southern region,” CGSI Research added.
The research house maintained its “add” recommendation on EcoWorld, with an unchanged target price of RM2.58 per share.
This valuation is based on a 40% discount to the group’s revised net asset value and implies a 1.4 times FY26 forecasted price-to-book value, which is two standard deviations above its 10-year mean.
“We like EcoWorld for its robust earnings outlook in FY25 to FY27, further land monetisation, and compelling dividend yield,” CGSI Research said.
However, the research firm cautioned that potential downside risks include “delays in project launches and lower sales growth”.
