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Eco World International Bhd (May 3, RM1.15)
Initiate coverage with hold and a target price (TP) of RM1.23: Eco World International Bhd (EWI) is managed by a team that includes Tan Sri Liew Kee Sin, the former group managing director/chief executive officer of S P Setia Bhd.
He was instrumental in turning S P Setia into one of the most successful property developers in Malaysia.
Incorporated in 2013, EWI currently has three ongoing development projects in London, one in Sydney and a site in Melbourne that is being acquired. EWI’s three development projects in London are held through a 75%-owned joint venture (JV).
These projects have an estimated gross development value (GDV) of £2.2 billion (RM12 billion). In Sydney, EWI has one project held through a 100%-owned subsidiary. This project’s GDV is estimated at A$315 million (RM1 billion).
EWI had its first launch in May 2015. As at January 2017, it had already sold properties worth £1,023 million in London and A$249 million in Sydney. These translate into RM6.5 billion based on the average exchange rates of £1:RM5.50 and A$1:RM3.35.
The projects in London and Sydney were acquired by EWI before its listing on April 3, 2017. On April 10, 2017, EWI announced the acquisition of an 80% stake in a development company that has a 0.5-acre (0.2ha) piece of land on the fringes of Melbourne’s central business district.
The company estimates that the project has a GDV of A$218million (RM730million). The project is targeted to be launched in the second quarter of financial year 2017 (2QFY17). Apart from completing its current projects, EWI wants to acquire more projects.
We believe the undersupply of mainstream market properties in London provides opportunities for EWI to grow while the rising number of wealthy individuals creates demand for property investments around the world.
We believe that EWI is well positioned to tap into these opportunities as it is led by a highly experienced management team.
We expect EWI’s projects to be completed in 2018-2021. As it will only recognise the revenue upon handover of its units, we project EWI to incur losses in FY17 due to administrative and sales expenses before it turns profitable from FY18.
We expect EWI’s 75%-owned JV in the UK to be its sole earnings contributor in FY18-FY19. We derive our TP based on parity to EWI’s revalued net asset value. — CIMB Research, May 2
This article first appeared in The Edge Financial Daily, on May 4, 2017.
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