Date of Report: September 19, 2024
Broker Name: CGS International Securities Malaysia

9MFY24 Results Performance

Eco World Development Group Bhd (EWDG) reported a core net profit of RM231.9 million for 9MFY24, which represents 78% of the broker’s full-year estimate. This result beat Bloomberg’s consensus estimate, achieving 82%. For 3QFY24, the group achieved a higher core net profit of RM89.2 million, marking an increase of 24% quarter-on-quarter and 36% year-on-year. Revenue for the first nine months of FY24 reached RM1.6 billion, reflecting a 17% year-on-year growth.

The revenue growth was driven by higher progress billing from ongoing projects and new launches. Moreover, higher profit margins were realized due to cost savings on certain projects. EWDG declared an interim dividend of 2 sen for 3QFY24, which brings the total dividend for 9MFY24 to 4 sen.

Key Takeaways from the 3QFY24 Results Briefing

Land Sales

EWDG entered into a conditional sale and purchase agreement on August 16, 2024, to sell a 57-acre parcel of land to Princeton Digital Group, a Singapore-based data center operator, for RM223.8 million (RM90 per square foot). This is the second significant land sale in its Quantum Edge project, following a sale of 123.1 acres to Microsoft Payment Sdn Bhd for RM402.3 million in June 2024.

Sales Performance

The group has already achieved RM3.5 billion in sales for 10MFY24, meeting its FY24 target. This success was largely driven by land sales in Johor worth RM626.1 million and growing contributions from high-rise products. As of the end of August 2024, the group’s unbilled sales remained robust at RM4.5 billion, representing a cover ratio of 2.0x.

Despite the notable sales figures, management did not raise its FY24 sales target. The group expects minimal impact from higher construction costs on near-term sales.

Outlook and Target Price

The broker reiterates an “Add” rating on EWDG, maintaining a target price (TP) of RM1.91, which implies a 9.8% upside from its current price. The TP is based on a 40% discount to its revised net asset value (RNAV) of RM3.18 per share and reflects a price-to-book value (P/BV) of 1.1x for 2025F, which is +2.0 standard deviations from the 10-year mean of 0.61x.

Key catalysts for re-rating include higher-than-expected sales from new and existing projects, as well as a better take-up rate for industrial products, benefiting from foreign direct investment (FDI) inflows. Potential downside risks include project launch delays and lower sales growth, which could affect progress billing.

Financial Overview

• 9MFY24 Revenue: RM1.6 billion (+17% YoY)
• 3QFY24 Core Net Profit: RM89.2 million (+24% QoQ, +36% YoY)
• 9MFY24 Core Net Profit: RM231.9 million (+26% YoY)
• Unbilled Sales (as of Aug 24): RM4.5 billion

Major Shareholders

• Sinarmas Harta: 32.9%
• Tan Sri Liew Kee Sin: 9.4%
• Eco World Development Holdings Bhd: 7.6%