Broker: UOB Kay Hian
Date of Report: Monday, 30 June 2025

Eco World Development Group: Strong Sales Momentum and New Launches Set to Drive Growth in FY26

Introduction

Eco World Development Group Berhad (ECW), a leading property developer with a significant presence in the Klang Valley, Iskandar Malaysia, and Penang, continues to demonstrate robust performance and promising growth prospects. This comprehensive analysis covers the company’s recent financial results, sales performance, upcoming launches, landbanking activities, and ESG initiatives, providing a detailed outlook for investors, analysts, and market observers.

Stock Overview and Performance

• Share Price: RM1.90
• Target Price: RM2.39 (up from RM2.37, +25.7% upside)
• Market Capitalization: RM5,651.2 million (US\$1,335.1 million)
• Shares Issued: 2,974.3 million
• 52-Week High/Low: RM2.16 / RM1.40
• Major Shareholders: Sinarmas Harta Sdn Bhd (32.6%), Liew Kee Sin (8.6%), Eco World Development Holdings (7.4%)
• FY25 NAV/Share: RM2.35
• FY25 Net Debt/Share: RM1.87

2QFY25 Financial Results: In Line with Expectations

Eco World Development delivered in-line results for the second quarter of FY25, maintaining strong sales momentum and preparing for significant launches in FY26. The company reported:

• Revenue: RM878.2 million (up 62.7% QoQ, 58.0% YoY)
• Gross Profit: RM264.8 million (up 72.9% QoQ, 79.6% YoY)
• EBIT: RM211.0 million (up 78.4% QoQ, 71.9% YoY)
• PBT: RM198.8 million (up 91.3% QoQ, 101.8% YoY)
• Core PATAMI: RM113.7 million (up 43.4% QoQ, 58.4% YoY)
• EBIT Margin: 24.0%
• Core PATAMI Margin: 13.0%

Unbilled sales reached an all-time high of RM5,215 million as of May 2025, reflecting a 4% QoQ increase. The company declared a 2 sen dividend for 2QFY25, bringing the first half dividend to 3 sen, up from 2 sen in 1HFY24.

Key Financial Highlights and Metrics

Strong Property Sales and Market Momentum

• Property sales for Mar-May 2025: RM1.06 billion, up 14% YoY
• 7MFY25 sales: RM3.0 billion, representing 70% of the full-year forecast of RM4.2 billion
• Commercial segment sales surged by 123% YoY, while residential township sales rose 79% YoY
• 84% of township residential sales were upgrader homes priced above RM650,000
• Industrial landbank stood at 1,594 acres (35% of total) with RM6.2 billion in GDV
• Recent notable industrial sale: 32.9 acres in EBP2 to Deye New Energy

Upcoming Launches to Boost FY26 Performance

Eco World is gearing up for three major launches to drive FY26 sales:

• EBP7: Slated for end-2025
• Eco Radiance: Launch in 1Q26
• Eco Botanic 3: Also launching in 1Q26

The launches will be supported by continued strong demand for ready-built factories and smaller industrial plots among local manufacturers and larger plots from global industrialists.

Financial Position and Gearing

The company’s net gearing ratio is expected to remain elevated in the near term, mainly due to:

• Completion of EBP7 and Kuala Langat land acquisitions
• Funding requirements for working capital and three new developments
• Equity funding for its build-to-lease data centre JV

Despite higher gearing, Eco World remains committed to maintaining stable dividend payouts, backed by robust cash generation from 16-18 mature projects and RM1.3 billion in remaining land sales proceeds.

Earnings Revision and Valuation

• FY25 earnings forecast revised by -4%, FY26 by +3%, and FY27 lifted by 21% to include recurring data centre rental income and EBP7 revenue
• Target Price: RM2.39 (from RM2.37)
• Valuation assumes removal of a 27% associate stake in Eco World International and inclusion of an 80% stake in the build-to-lease data centre JV, valued at RM713 million
• DCF approach used for data centre, with RM4.8 billion rental income over 20 years, WACC of 6.8%, and 8% exit cap rate
• Target price based on a 35% discount to revised RNAV of RM3.67/share, implying 1.4x FY26F P/B and 16.2x FY26F PE

Landbanking Status and Project Pipeline

Data Centre Land Sales Status

Environmental, Social, and Governance (ESG) Commitments

• Environmental: Achieved a 36% reduction in Scope 2 GHG emissions (market electricity) from FY19 to FY24
• Social: 100% of building materials suppliers and main contractors are local
• Governance: Strong transparency and implementation of Anti-Bribery and Anti-Corruption Policy

Revenue Contribution by Business Pillars (7MFY25)

• Eco Townships: 31%
• Eco Rise: 15%
• Eco Hubs: 14%
• Eco Business Parks: 8%
• Quantum: 32%

Profitability, Growth, and Leverage Metrics

• EBITDA Margin: 21.7% (2024), 22.7% (2025F)
• Pre-tax Margin: 18.0% (2024), 18.9% (2025F)
• Net Margin: 13.4% (2024), 14.3% (2025F)
• ROA: 3.1% (2024), rising to 4.8% (2027F)
• ROE: 6.6% (2024), rising to 11.1% (2027F)
• Debt to Total Capital: 46.2% (2024), peaking at 89.7% (2025F) before moderating
• Net Debt to Equity: 18.4% (2024), rising to 57.3% (2025F)
• Interest Cover: 4.2x (2024), 4.4x (2025F)

Conclusion: Investment Outlook Remains Robust

Eco World Development Group remains a compelling BUY, supported by a strong sales track record, well-timed launches, and a diversified landbank. The inclusion of recurring data centre rental income is set to structurally uplift earnings quality, while management’s commitment to dividends and prudent financial management further enhances the investment case. With a revised target price of RM2.39 and a 17% CAGR projected during FY25-27, Eco World stands out as a key player in Malaysia’s property sector, positioned for sustainable, long-term growth.