Eco World Development Group A Force To Be Reckoned With In 2016

Transcription

1 06 January 2016 Initiate Coverage Eco World Development Group A Force To Be Reckoned With In 2016 Initiate with BUY Target Price (TP): RM1.88 INVESTMENT HIGHLIGHTS Property developer with GDV of RM81.16b FY15 sales higher compared to peers estimated sales Superior earnings growth against peers Undervalued as its current valuation is 1.26SD below mean Price-to-RNAV BUY with Target Price of RM1.88 Property developer with acres of landbank and gross development value (GDV) of RM81.16b. Eco World Development Group Berhad (ECOWLD) is a Malaysian property developer with projects in three key economic regions in Malaysia namely Klang Valley, Penang and Johor. Out of the total acres of landbank, acres (or 84%) are still undeveloped with remaining GDV of RM74.96b (or 92% of total GDV of RM81.16b). RM3.02b sales achieved in FY15 is the highest among peers. In FY15, ECOWLD achieved properties sales of RM3.02b (100% from Malaysia). This is higher compared to peers estimated sales for FY15 of between RM0.50b to RM2.30b. Superior earnings growth against peers. We expect strong core earnings growth of 183%yoy in FY16 to RM124.8m as contributions from key projects such as Eco Majestic, Eco Sanctuary and Eco Sky are expected to be recognized. Note that ECOWLD has strong unbilled sales of RM4.16b as of end-fy15 and its FY16 earnings are expected to grow by 183%, much higher than peers average of 13% growth. Undervalued as current share price is below 1.0SD of mean Price-to-RNAV. Our estimate shows that the current share price of RM1.43 values ECOWLD at 0.57x Price-to-RNAV (PRNAV) or negative 1.26 Standard Deviation (-1.26SD) below mean PRNAV. We believe that the current valuation is not justified as the Group has proven to secure highest property sales in Malaysia with superior earnings growth against its peers coupled with experienced management. Initiate coverage on ECOWLD with a BUY recommendation and a Target Price of RM1.88 based on Price-to-RNAV (PRNAV) of 0.75x reflecting 0.5SD valuation above mean. We believe that ECOWLD deserves the slight premium valuation of +0.5SD. This is due to its excellent sales achievement, superior earnings growth prospects and strong branding. Catalyst for the stock will be the successful achievement of sales target and earnings delivery. RETURN STATS Price (4 Jan 2016) Target Price Expected Share Price Return RM1.43 RM % Expected Dividend Yield +0.0% Expected Total Return +31.2% STOCK INFO KLCI 1, Bursa / Bloomberg Board / Sector Syariah Compliant 8206 / ECW MK Main/ Properties Yes Issued shares (mil) Par Value (RM) 0.50 Market cap. (RM m) 3, Price over NA wk price Range RM RM2.10 Beta (against KLCI) mth Avg Daily Vol 1.88m 3-mth Avg Daily Value Major Shareholders (%) RM2.67m Sinarmas Harta Sdn Bhd 32.02% Eco World Development 21.29% Liew Tian Xiong 11.27% EPF 9.04% MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK Kindly refer to the last page of this publication for important disclosures

2 INVESTMENT STATISTICS FYE Oct 2013A* 2014A** 2015A 2016F 2017F Revenue ,712 2,255 2,715 EBIT PBT Net Income Core Net Income EPS (sen) Core EPS (sen) Net DPS (sen) Net Dvd Yield Core PER NTA/share (RM) P/NTA Core ROE 7.6% 2.8% 1.4% 3.8% 6.5% Core ROA 5.0% 1.3% 0.6% 1.6% 2.5% *FY13 financial year ends on September **FY14 financial year comprises 13 months as financial year end was changed to October Source: Company, Forecast by MIDF Research 1. Investment Merit Excellent sales achievement in Malaysia; highest compared to the estimated sales of its peers in FY15. In FY15, ECOWLD achieved properties sales of RM3.02b which have been fully derived from the sales of properties in Malaysia. This is the highest compared to the estimated sales of other all property companies under our coverage of between RM0.50b to RM2.30b in FY15. Out of the RM3.02b sales achieved by ECOWLD in FY15, the biggest contributor was sales of Klang Valley properties totaling RM1.58b, representing 52% of the Group s total sales. This was followed by Johor (Sales amount: RM1.21b; 40% contribution) and Penang (Sales amount: RM0.22b; 8% contribution). Chart 1: ECOWLD sales highest in Malaysia Source: Company, MIDF Research Compilation 2

3 Table 1: ECOWLD sales comparison against peers Company Year End Sales Estimate (Malaysia only), RM m ECOWLD Oct MAHSING Dec SPSETIA* Dec E&O Mar SUNWAY Dec UEMS Dec UOADEV Dec GLOMAC Apr Source: Company, MIDF Research Compilation * Only the first 12 months of SPSETIA financial year from Nov 2014 to Oct 2015 Chart 2: ECOWLD FY15 sales breakdown Source: Company, MIDF Research Compilation 3

4 Superior earnings growth against peers. We expect strong core earnings growth of 183%yoy in FY16 to RM124.8m as contributions from key projects such as Eco Majestic, Eco Sanctuary and Eco Sky are expected to be recognized. Note that ECOWLD has strong unbilled sales of RM4.16b as of end-fy15 out of which RM2.35b or 56% are from the three projects mentioned previously. Looking into FY17, earnings prospect is likely to improve further as we forecast FY17 core earnings to grow 83%yoy to RM228.6m. This will be underpinned by RM3.5b sales expected in FY16 as well as recognition from some of the existing unbilled sales of RM4.16b. Note that ECOWLD FY16 earnings are expected to grow by 183%, much higher than peers average of 13% growth. Undervalued as current share price reflects valuation of 1.0SD below mean PRNAV. Our estimate shows that the current share price of RM1.43 values ECOWLD at 0.57x Price-to-RNAV (PRNAV) or 1.26 Standard Deviation below mean PRNAV. We believe that the stock s current valuation at below its mean PRNAV is not justified. This is due to its ability to secure highest sales in Malaysia, superior earnings growth against its peers and experienced management. Hence, we believe that ECOWLD fair value should be pegged to mean PRNAV of 0.75x which represents a 25% discount to its fully diluted RNAV. We think that the mean valuation is fair as the three positive points highlighted earlier should outweigh concerns on the challenging outlook for the sector. Chart 3: ECOWLD Price To RNAV Standard Deviation Source: Bloomberg, MIDF Research Estimate Combined industry experience exceeding 125 years among the senior management. ECOWLD is helmed by some of the most well-known industry players in the Malaysian property sector with combined experience exceeding 125 years. The Company s Chairman Tan Sri Dato' Sri Liew Kee Sin (Tan Sri Liew) has industry experience of 29 years. Tan Sri Liew has also won multiple awards including i) Property Man of the Year by FIABCI Malaysia Property Awards 2007, ii) 2012 Outstanding Property Personality Award by The Edge Malaysia and iii) 2013 Malaysia's Outstanding CEO by The Edge Billion Ringgit Club. Besides Tan Sri Liew, other prominent names in ECOWLD management team include are Dato Leong Kok Wah (Deputy Chairman), Dato Chang Khim Wah (President & CEO), Tan Sri Abdul Rashid (Founder), Dato Voon Tin Yow (Executive Director) and Datuk Heah Kok Boon (Executive Director & CFO). Within the short time frame of two years, ECOWLD has achieved the highest property sales in Malaysia and this is the testimony of the strong delivery capability of its current management team. 4

5 3. Financial Analysis Expect strong property sales of RM3.5b in FY16 (+17%yoy) followed by RM4.0b in FY17 (+14%yoy). We expect ECOWLD to continue its strong delivery of sales in FY16. Locally, we believe that ECOWLD should achieve RM2.7b sales with key contributions from Eco Majestic, Eco Sanctuary and 40% share of sale from BBCC. For the overseas market, ECOWLD should achieve RM0.8b of sales through its 30% share of sales from Eco World International (EWI). ECOWLD is expected to invest 30% in EWI in 6 months time. Our assumption is more conservative against management s target of RM4.0b for FY16 and RM4.5b for FY17. This is due to our less optimistic outlook on the sector, in particularly Johor. Strong FY16 core earnings growth of 183%. Factors contributing to the strong earnings jump to RM124.8m will be from key projects such as Eco Majestic, Eco Sanctuary and Eco Sky. Note that ECOWLD has strong unbilled sales of RM4.16b as of end-fy15 out of which RM2.35b or 56% of it are from the three projects mentioned previously. Earnings momentum is likely to continue in FY17 as we forecast FY17 core earnings to grow by 83%yoy to RM228.6m. This will be underpinned by RM3.5b sales expected in FY16 as well as recognition from some of the existing unbilled sales of RM4.16b. Net gearing should increase in FY16 and FY17 but to decline from FY18 onwards. We do expect ECOWLD net gearing to increase to 0.72x by end-fy17 as the Company is expected to invest in 30% stake in Eco World International (EWI) IPO. We have also assumed RM500m purchase of landbank annually for FY16 and FY17. Despite the expected increase in net gearing, we are not overly concerned as we reckon that ECOWLD is still in the growth stage hence the need for higher gearing is justified. Once the Company reach a more mature stage from FY18E onwards, we expect net gearing to decline progressively to 0.56x/0.46x/0.33x by end FY18/FY19/FY20. To distribute dividends only from FY18 onwards. As ECOWLD in still a high growth stage, we expect the company s earnings to grow by more than 50% in the next two years. Also, we do not expect any dividends in FY16 and FY17. In our view, the reinvestment of earnings in the Company to acquire landbanks or pare down debts should generate higher earnings in the long run as compared to paying dividend in FY16 and FY17. From FY18 onwards, we believe that the Company should start with small dividend payout of 10% translating into 1.6 sen per share or 1.1% dividend yield. FY15 earnings exceeded market expectation with sales target of RM3.0b achieved. ECOWLD FY15 core earnings of RM44.2m exceeded market expectation at it was 13% ahead of market expectation of RM39.2m. Sales of RM3.02b was achieved and this was slightly ahead of the Company s internal target set of RM3.0b. Table 2: ECOWLD FY15 sales by region FY2014 FY2015 Region Units Launched Units Sold Sales Value (RM'm) Units Launched Units Sold Sales Value (RM'm) Klang Valley 2,375 1,692 1, ,555 1,321 1,579.1 Johor 2,277 1,724 1, ,110 1,492 1,213.1 Penang Total 4,652 3,416 3, ,193 3,092 3,016.5 Source: Company, MIDF Research Compilation 5

6 4. Peers Comparison Superior sales and earnings growth against peers. We believe that ECOWLD s 17% property sales growth expected in FY16 is likely to outperform all peers in which we expect their sales to be flattish yoy. In terms of absolute sales number, we also believe that ECOWLD sales expected at RM3.5b is likely to be the highest among its peers. Earnings wise, we expect ECOWLD core earnings growth of 183%yoy in FY16 to RM124.8m and this is much higher than peers average growth of 13%. Forward PE valuation of 27.1x is highest among peers; but it is still deep in value considering its FY16 earnings growth of 183%. As ECOWLD is still at high growth stage, we believe that Forward PE measurement alone may not be meaningful. Adjusted for earnings growth, ECOWLD PE/Growth (or PEG ratio) of 0.15x will be the lowest among all property developers under our coverage which has the average of 3.23x. Note that PEG measures how many times of PEs investors are paying for every 1% of growth prospect. Chart 4: ECOWLD Forward PE against peers Source: Company, MIDF Research Compilation Net gearing of 0.37x is on par with other developers. ECOWLD s balance sheet strength is on par with other property developers. Note that ECOWLD s net gearing of 0.37x is within the range of 0.06x to 0.75x for other property developers under our coverage. Chart 5: ECOWLD net gearing of 0.37x is on par with other developers Source: Company, MIDF Research Compilation 6

7 5. Sector Outlook 3QCY15 House Price Index (HPI) growth of 5.4%yoy is the lowest in 5 years. HPI grew by 5.4%yoy and 0.8%qoq to in 3QCY2015. Note that this is significantly lower than the 5-year average growth of 9.7%. Among the key states, the slowest yoy growth was recorded in Johor (+3.0%yoy) and Penang (+3.5%yoy). Selangor HPI growth was better at +6.2%yoy followed by Kuala Lumpur s +5.3%yoy. We believe that the outlook for property price is better in Greater KL (Selangor and KL) due to the support from urbanization factor. Uninspiring loan demand for property purchases so far. The latest Bank Negara statistics show that Applied Loan for Purchase of Property has declined 13%yoy in Oct-2015 to RM25.19b. This is weaker than Sept-2015 data which declined 9%yoy. On a monthly sequential basis, the data was 1% lower. We are negative on the data as the number is showing nine consecutive on-year declines since Feb YTD, 10M2015 Applied Loan was 7% lower onyear at RM253.88b. In our view, consumer appetite on big ticket items such as property remains low due to rising cost of living and weakening of Ringgit. Lower yoy sales trend should continue in 1HCY16. The latest publication from Malaysian Institute of Economic Research (MIER) shows that Consumer Sentiment Index (CSI) is at all-time low of Some notable comments from MIER include Trepidations of higher prices moderating and Shopping plans on low gear and we concur with this due to escalating cost of living due to GST and weakening Ringgit. Hence, we believe that consumer is likely to defer big item purchases in the near term. As a result, we believe that the trend of lower new property sales yoy by developers is likely to continue at least in the 1HCY16. Despite the challenging property sector outlook, we still expect ECOWLD sales to grow by 17%yoy to RM3.5b due to support from overseas market. Our property sales assumption of RM3.5b for FY16 includes RM0.8b of overseas sales through its 30% share of sales from Eco World International (EWI). Effectively, we are expecting local sales to be stable with all of the growth coming from the overseas market. Locally, we believe that ECOWLD should achieve RM2.7b sales with key contributions from Eco Majestic, Eco Sanctuary and 40% share of sale from BBCC. Recall that our assumption is already more conservative against management target of RM4.0b for FY16 due to our less optimistic outlook on the sector particularly in Johor. 6. Valuation and Recommendation Initiate coverage on ECOWLD with a BUY recommendation and a Target Price of RM1.88. Our Target Price is based on Price-to-RNAV (PRNAV) of 0.75x reflecting a 0.5SD above mean PRNAV. This is equivalent to 25% discount to ECOWLD Fully Diluted Revalued Net Asset Valuation (FD RNAV) per share of RM2.50. We believe that ECOWLD deserve the slight premium valuation of +0.5SD due to its excellent sales achievement, superior earnings growth prospect and strong branding. Note that we have set our timeline for PRNAV measurement from April-2014 onwards to reflect the current ECOWLD corporate structure. We have applied WACC of 10.0% into the Discounted Cash Flow (DCF) model for ongoing projects while landbank valuation is used for future projects. All said, we derive our Target Price of RM1.88 and a BUY recommendation for ECOWLD. Catalyst for the stock will be the successful achievement of sales target and execution of projects for earnings delivery. Table 3: Key Variables Used In WACC estimate Cost of Equity Input Value Risk Free Rate, RFR 4.45% Beta, β 1.44 Market Return, Rmarket 10.0% WACC Estimate Input Value Equity Weightage 67% Debt Weightage 33% Cost of Equity 12.5% Cost of Debt 4.8% WACC 10.0% Source: MIDF Research Estimate 7

8 Table 4: ECOWLD RNAV Landbank/Buildings Ongoing Projects Location Remaining GDV Methodology Stake Value (RM m) Saujana Glenmarie Shah Alam, Selangor 13 WACC 10% 100% 2.5 Eco Sky Jalan Ipoh, KL 338 WACC 10% 100% 57.9 Eco Majestic Semenyih, Selangor 9581 WACC 10% 100% Eco Sanctuary Telok Panglima Garang, Selangor 7347 WACC 10% 100% Eco Botanic Taman Bukit Indah, Johor 2547 WACC 10% 100% Eco Tropics Pasir Gudang, Johor 2953 WACC 10% 100% Eco Spring & Summer Johor 5071 WACC 10% 100% Eco Business Park I Senai, Johor 3345 WACC 10% 100% Eco Business Park III Pasir Gudang, Johor 1898 WACC 10% 100% Eco Terraces Paya Terubong, Penang Island 374 WACC 10% 100% 53.8 Eco Meadows Seberang Prai, Penang 750 WACC 10% 100% Unbilled Sales All projects 4158 WACC 10% 100% New projects to be launched soon in FY16 Bukit Bintang City Centre Jalan Hang Tuah, KL 8782 WACC 10% 40% Eco Business Park II Senai, Johor 3009 WACC 10% 100% Remaining Landbank Size (ac) Size (Sq ft) Price (RM/sqft) Stake Value (RM m) Eco Forest Semenyih, Selangor ,462, % Eco Gardens Ijok, Selangor ,172, % Eco Business Park V Ijok, Selangor ,590, % Georgetown, Penang Eco Macalister Island 1 47, % 21.8 Eco Marina Batu Kawan, Penang ,050, % Total Properties Value Investment Properties 17.3 Fixed Assets Cash Other Assets (except deferred tax assets) Total Liabilities (excl. deferred tax liabilities) Total RNAV (RM m) No of shares (m) RNAV per share (RM) 2.60 RM Fully Diluted No of Shares FD RNAV Per Share 2.50 Discount 25% Target Price (RM) 1.88 Source: Company, MIDF Research Forecast 8

9 7. Risks High net gearing in the near term. As mentioned previously, we do expect ECOWLD net gearing to increase to 0.72x by end-fy17 due to the need to subscribe to 30% stake in EWI IPO. Additionally, we expect ECOWLD to spend significant amount of its cash flow to expand its landbank. Our base case scenario is for ECOWLD to pare down its debt only from FY18 onwards. However, net gearing may turned out to be higher than expected if sector weakness last longer than expected. Weak consumer sentiment may last longer than expected. Our base case assumption is that Malaysia Consumer Sentiment Index (CSI) should recover in 2HCY16 from its all-time low of 70.2 as of 3QCY15. In case CSI deteriorated further or stay low for an extended period, it is possible that ECOWLD s property sales may be affected. Nonetheless, ECOWLD high exposure to landed township developments should allow the Company to perform better than its peers. EPS dilution risk when share price rise above RM2.08. The Company still has 525.4m warrants with exercise price of RM2.08 and maturity date of 26-Mar Note that the ratio for conversion is one warrant to one ECOWLD shares. As some of the warrant holders may convert the warrants into ECOWLD shares when the share price exceed RM2.08 in the future, this may dilute the Company s EPS. On the positive side, the conversion will raise some cash for the Company. Overall, we believe that the EPS dilution risk is not significant in the near term as the warrant is currently out-of-the-money as the current share price of RM1.43 is still way below the exercise price of RM Company Background Mainly a property developer. Eco World Development Group Berhad (ECOWLD) is a Malaysian property developer with projects in three key economic regions in Malaysia namely Klang Valley, Penang and Johor. The Company name is changed to Eco World Development Group Berhad in Dec-2013 (from Focal Aims Holdings Berhad) to preserve the strong brand of Eco World. Overall, the Company has acres of landbank with a total gross development value (GDV) of RM81.16b from 17 ongoing and future property development projects. Out of the total acres of landbank, acres (or 84%) are still undeveloped with remaining GDV of RM74.96b (or 92% of total GDV of RM81.16b). Klang Valley: Four ongoing projects with BBCC poised to be launched in ECOWLD has four ongoing property development projects in Klang Valley with total remaining GDV of RM17.28b. These include Eco Semenyih Selangor, Eco Teluk Panglima Garang Selangor, Eco Jalan Ipoh KL and Saujana Shah Alam Selangor. In 2016, ECOWLD is poised to launch Bukit Bintang City Centre (BBCC) with GDV of RM8.78b. BBCC is a redevelopment projects of the 19.4 acres Pudu Jail site into a mixed residential and commercial properties. Note that ECOWLD holds a 40% stake in BBCC with another 40% by Urban Development Authority of Malaysia (UDA) and 20% by Employee Provident Fund (EPF). Chart 6: Location of ECOWLD projects in Klang Valley Source: Company 9

10 2.1 Eco Semenyih Selangor Landbank acres Size Undeveloped acres (67% of total) Total GDV RM11.15b Remaining RM9.58b GDV Type Township (Residential and Commercial). Tenure Freehold 2.2 Eco Teluk Panglima Garang Selangor Landbank acres Size Undeveloped acres (63% of total landbank) Total GDV RM8.00b Remaining RM7.35b (92% of total GDV) GDV Type Township (Residential and Commercial). Tenure Leasehold 10

11 2.3 Eco Jalan Ipoh KL Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure 9.6 acres 0 acres RM0.97b RM0.34b (35% of total GDV) Retail, Office, Residence Freehold 2.4 Saujana Shah Alam Selangor Landbank Size 25.9 acres Undeveloped 0 acres Total GDV RM0.09b Remaining GDV RM0.013b (14% of total GDV) Type Residential Tenure Freehold 11

12 2.5 Bukit Bintang City Centre (BBCC) ECOWLD owns 40% stake Landbank Size 19.4 acres Undeveloped 19.4 acres (100% of total landbank) Total GDV RM8.78b Remaining GDV RM8.78b (100% of total GDV) Type Mixed development Tenure Leasehold Johor: Six ongoing projects. ECOWLD has six ongoing property development projects in Johor with total remaining GDV of RM18.823b. These include Eco Botanic, Eco Spring & Summer, Eco Tropics, Eco Business Park I, Eco Business Park II, and Eco Business Park III. Chart 7: Location of ECOWLD projects in Johor Source: Company 12

13 2.6 Eco Botanic, Iskandar Malaysia Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure acres acres (62% of total landbank) RM3.79b RM2.55b (67% of total GDV) Township Freehold 2.7 Eco Spring & Summer, Iskandar Malaysia Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure acres acres (71% of total landbank) RM5.87b RM5.07b (86% of total GDV) Township Freehold 13

14 2.8 Eco Tropics, Kota Masai Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure acres acres (90% of total landbank) RM3.40b RM2.95b (87% of total GDV) Township Freehold 2.9 Eco Business Park I, Tebrau Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure acres acres (69% of total landbank) RM3.80b RM3.35b (88% of total GDV) Business park Freehold 14

15 2.10 Eco Business Park II, Iskandar Malaysia Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure acres acres (100% of total landbank) RM3.01b RM3.01b (100% of total GDV) Business park Freehold 2.11 Eco Business Park III, Iskandar Malaysia Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure 248 acres 196 acres (79% of total landbank) RM2.00b RM1.90b (95% of total GDV) Business park Freehold 15

16 Penang: Two ongoing projects and two lands for future launch. ECOWLD has two ongoing property development projects in Johor with total remaining GDV of RM1.124b. These include Eco Terraces and Eco Meadows. ECOWLD also has two pieces of land for future use (target launch beyond FY16). The first is 300 acres of land at Batu Kawan, Penang with GDV of RM10.0b while another one small piece of land measuring 1.1 acres is located at Georgetown, Penang Island. Chart 8: Location of ECOWLD projects in Penang Source: Company 2.12 Eco Terraces, Penang Island Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure 12.8 acres 0.0 acres RM0.43b RM0.37b (87% of total GDV) High rise residential Freehold 16

17 2.13 Eco Meadows, Penang mainland Landbank Size Undeveloped Total GDV Remaining GDV Type Tenure 76.5 acres 44.2 acres (58% of total landbank) RM0.92b RM0.75b (82% of total GDV) Township Freehold 9. Key Shareholders 73.62% of its shares held by key shareholders % EcoWorld shares are owned by key shareholders. As at 22 December 2015, the largest shareholder is Sinarmas Harta Sdn Bhd with 32.02% stake followed by EcoWorld Development Holdings (21.29%) and Liew Tian Xiong (11.27%). Meanwhile, EPF holds 9.04% stake. Table 5: Key Shareholders of ECOWLD Key Shareholders Source: Company Stake SINARMAS HARTA SDN BHD 32.02% ECOWORLD DEVELOPMENT HOLDINGS 21.29% LIEW TIAN XIONG 11.27% EPF 9.04% Total 73.62% 17

18 10. Management Team Combined industry experience exceeding 125 years among the senior management. ECOWLD is helmed by some of the most well-known industry players in the Malaysian property sector with combined experience exceeding 125 years. The Company s Chairman Tan Sri Dato' Sri Liew Kee Sin (Tan Sri Liew) has industry experience of 29 years. Tan Sri Liew has also won multiple awards including i) Property Man of the Year by FIABCI Malaysia Property Awards 2007, ii) 2012 Outstanding Property Personality Award by The Edge Malaysia and iii) 2013 Malaysia's Outstanding CEO by The Edge Billion Ringgit Club. Besides Tan Sri Liew, other prominent names in ECOWLD management team include are Dato Leong Kok Wah (Deputy Chairman), Dato Chang Khim Wah (President & CEO), Tan Sri Abdul Rashid (Founder), Dato Voon Tin Yow (Executive Director) and Datuk Heah Kok Boon (Executive Director & CFO). Details of the Board Of Directors Profile are attached below. Table 6: Board Of Directors Profile NAME Position Background -Tan Sri Liew holds a Bachelor of Economics Degree (Business Administration) from University of Malaya. TAN SRI DATO SRI LIEW KEE SIN Chairman -Tan Sri Liew started his career as a banker in a local merchant bank in After 5 years of extensive experience in the banking industry, he ventured into property development and developed his first project called Bukit Indah in Ampang, Selangor Darul Ehsan. -In May 1996, Tan Sri Liew was appointed as Group Managing Director of S P Setia Berhad. He resigned from his position as President and Chief Executive Officer of S P Setia on 30 April DATO LEONG KOK WAH Deputy Chairman -Dato Leong has an extensive career and held senior positions in the construction industry. He also has vast experience in stockbroking, asset management and options and futures trading -He is currently an Executive Director of Salcon Berhad and sits on the Board of various companies in Malaysia. He was formerly a Director of S P Setia Berhad. -Dato Leong also sits on the Board of MUI Continental Berhad. He is also the Chairman of Risk Management Committee, Audit Committee member and Investment Committee member of MUI Continental Berhad. DATO CHANG KHIM WAH President & Chief Executive Officer -Dato Chang has 27 years of experience in the property development industry. -He began his career as a consultant engineer in Australia from 1989 to Upon his return to Malaysia in 1991, he joined one of the biggest consultancy firms in Malaysia, KTA-Tenaga Sdn Bhd. -Dato Chang was previously a Director of S P Setia Berhad. He left S P Setia Berhad to join Eco World Development Sdn Bhd on 1 May

19 NAME Position Background -Tan Sri Abdul Rashid is a full-time businessman. Before venturing into business, he was a senior partner in a legal firm in Kuala Lumpur until his retirement on 24 August TAN SRI ABDUL RASHID BIN ABDUL MANAF LIEW TIAN XIONG Founder/Non- Independent Non- Executive Director Executive Director -In 1970, he became a Barrister-at-Law. He joined the Malaysian Judicial and Legal Service in 1971 and became a Magistrate until He was later made the President of the Sessions Court in Klang. In 1975, he became the Senior Federal Counsel for the Income Tax Department. He left the Government Service in He was formerly Chairman of the Board of S P Setia Berhad from 12 March 1997 till 25 October Mr. Liew Tian Xiong serves as an Executive Director of Eco World Development Group Berhad since 29 November Mr. Liew graduated in 2012 with a Bachelor of Commerce from the University of Melbourne, Australia. Prior to that, he had work experience from attachments with Pheim Asset Management Sdn Bhd (2010 and 2011) and AmBank (M) Berhad (2010). -He is a substantial shareholder of Eco World Development Group Berhad and the son of Tan Sri Dato Sri Liew Kee Sin. DATO VOON TIN YOW DATUK HEAH KOK BOON Executive Director Executive Director & Chief Financial Officer -Dato Voon Tin Yow has 30 years of working experience in the construction and property development industry, which includes 3 years in construction site management and 27 years in management of property development. -He began his working career in 1984 by joining Kimali Construction Sdn. Bhd. as a Site Engineer and in 1986, he held the post of Development Engineer in Juru Bena Tenaga Sdn. -He was previously an Executive Director of S P Setia Berhad and carries the post of Chief Operating Officer from 1996 to Dato' Voon is currently an Independent Non-Executive director of Asian Healthcare Group Berhad. -Datuk Heah has garnered more than 25 years experience in audit, corporate finance and corporate investment. -He started his career in the audit department of an international accounting firm KPMG. -Datuk Heah then joined S P Setia Berhad as Head of Corporate Affairs where he planned and executed S P Setia s financial strategies/funding needs and mergers & acquisitions exercises -He left to join Eco World Development Sdn Bhd on 1 May

20 NAME Position Background -Mr. Tang qualified as a Certified Public Accountant, Malaysia with Turquand Youngs & Co, an antecedent firm of Ernst & Young. TANG KIN KHEONG Senior Independent Non-Executive Director -Mr. Tang is also a member of the Malaysian Institute of Accountants. In all, Mr. Tang has had 24 years of experience as a practicing accountant. He is a licensed auditor and licensed liquidator. -Mr. Tang was appointed as the Chairman of the Audit Committee of Eco World Development Group Berhad on 29 November TAN SRI LEE LAM THYE DATO HAJI OBET BIN TAWIL DATO IDROSE BIN MOHAMED DATO NOOR FARIDA BINTI MOHD ARIFFIN Source: Company Non-Independent Non- Executive Director Independent Non- Executive Director Independent Non- Executive Director Independent Non- Executive Director -Tan Sri Lee started his career as a teacher and later became a unionist. He was elected and served as the State Legislative Assemblyman for Bukit Nanas from 1969 to From 1974 to 1990, he served as a Member of Parliament for Bandar Kuala Lumpur/Bukit Bintang. -Tan Sri Lee also sits on the Boards of Amcorp Properties Berhad and Media Prima Berhad. -Dato Haji Obet was previously the State Secretary of Johor from March 2011 until April 2014 before his retirement on 9 April Prior to that he was the Director of Johor Land and Mines Department. -Dato Haji Obet was a director of Johor Corporation and Universiti Teknologi Malaysia from 14 March 2011 until 9 April Dato Idrose is a Civil Engineer who has served both the government as well as in the private sector. -Dato Idrose has over 30 years of extensive experience in planning, engineering, construction, project and infrastructure implementation as well as services and operations management. -He currently sits on the board of several private limited companies. - Dato' Noor Farida completed her legal studies at the Inns of Court in London. - She joined the Judicial and Legal Service in February 1971 where she served in various capacities including magistrate, senior assistant registrar in the High Courts of Kuala Lumpur and Penang, legal officer with the Economic Planning Unit of the Prime Minister's Department, Director of the Legal Aid Bureau and Sessions Court Judge. - Between 2000 and 2007, she was the Ambassador of Malaysia to the Kingdom of the Netherlands. 20

21 Income Statement Balance Sheet FY Oct (RM m) 13A* 14A** 15A 16E 17E FY Oct (RM m) 13A* 14A** 15A 16E 17E Revenue Land held for property dev Gross Profit Property development costs Admin Expenses Plant and Equipment Selling & Marketing Expenses Cash & Equivalents Other Income Inventories EBIT Trade and other Receivables Finance Costs Other Assets JV and Associates Total Assets PBT Trade and other Payables Tax ST Borrowings Net Profit LT Borrowings Core Net Profit Other Liabilities Equity Cashflow Statement FY Oct (RM m) 13A* 14A** 15A 16E 17E Equity + Liability PBT Key Ratios Deprn & Non Cash Adj FY Oct (RM m) 13A* 14A** 15A 16E 17E Working Cap Chgs Revenue Growth NA -5.1% % 31.7% 20.4% Cash Tax Paid Core Net Income Growth NA % 392.1% 182.5% 83.1% Others GP Margin (%) 30.9% 28.5% 24.1% 26.0% 26.0% Operating CF Core Net Profit Margin (%) 15.5% 6.1% 2.6% 5.5% 8.4% Additions to land held for prop dev Capex Core ROE 7.6% 2.8% 1.4% 3.8% 6.5% Others Core ROA 5.0% 1.3% 0.6% 1.6% 2.5% Investing CF Net Gearing Debt Raised/(Repaid) PER (x) Equity Raised/(Repaid) Core PER (x) Div Paid Dividend Yield (%) Financing CF Book Value (RM) Change in Cash P/BV Beginning Forex Diff on Open Bal Key Drivers And Assumptions End FY Oct (RM m) 13A* 14A** 15A 16E 17E *FY13 financial year ends on September **FY14 financial year comprises 13 months as financial year end was changed to October Source: Company, MIDF Research Sales (RM m) NA GP Margin 30.9% 28.5% 24.1% 26.0% 26.0% Interest cost 0.0% 5.7% 8.5% 5.2% 5.2% 21

22 DAILY PRICE CHART Alan Lim, CFA Source: Bloomberg 22

23 MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad ( X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL TRADING SELL Total return is expected to be >15% over the next 12 months. Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between -15% and +15% over the next 12 months. Total return is expected to be <-15% over the next 12 months. Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 23