Eco World Development Group Berhad

Transcription

1 10 June 2016 Corporate Update Eco World Development Group Berhad Landbanking at Bukit Raja, Klang Maintain BUY Adjusted Target Price (TP): RM1.68 (Previously RM1.62) INVESTMENT HIGHLIGHTS Acquiring 50% stake in JV-Co for RM303.5m JV-Co to develop Eco Ardence with GDV of RM8.5b Valuation is fair at RM56 per sq ft Positive on the news Maintain BUY with higher Target Price of RM1.68 Acquiring 50% stake in JV-Co for RM303.5m. Eco World Development Group Berhad (ECOWLD) has entered into a conditional share sale and purchase agreement with Cascara Sdn. Bhd. (Cascara) to purchase a 50% stake in Jendela Hikmat for RM303.5m. ECOWLD and Cascara have agreed to develop the land which belongs to Jendela Hikmat, the joint venture company (JV-Co). The JV structure allows Cascara (the seller of the 50% stake) to still participate in the future potential of the land. Refer to Page 2 for the structure of the JV-Co. JV-Co to develop Eco Ardence with GDV of RM8.5b. We gather that the JV-Co will develop its acres of landbank located at Bukit Raja, Klang into a mixed residential and commercial development to be known as Eco Ardence. Effective agreed land price is RM1.29b or RM56 per sq ft (after imputing RM722.1m of liabilities and provision for tax revaluation surplus and cash of RM36.5m). Valuation is fair at RM56 per sq ft although it is much lower than the asking price of RM180 per sq ft for individual land plots in surrounding area. We believe that the discount is justified as it involved a much bigger piece of land hence the future consideration of required public infra expenditures. Positive on the news. Our Fully Diluted RNAV value will be increased by 6% to RM2.24 per share (from RM2.16) after imputing Eco Ardence. Total GDV of the Company will be increased by RM8.5b or 13% to RM73.46b. The JV structure allows ECOWLD to avoid pressure on its balance sheet as it does not need to consolidate the liabilities of the JV- Co. We estimate that end-fy16 net gearing to increase to 0.57x (from earlier estimate of 0.52x). Sales and earnings estimate maintained. FY17 sales target is maintained as the contribution from Eco Ardence (estimated to be launched in 1HFY17) should neutralize the impact of the loss of contribution from Eco Marina, Batu Kawan project. FY16 sales target of RM3.5b (which is more conservative than management target of RM4.0b) is also maintained. RETURN STATS Price (9-Jun-2016) Target Price Expected Share Price Return RM1.27 RM % Expected Dividend Yield +0.0% Expected Total Return +32.3% STOCK INFO KLCI 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 RM1.67 Beta (against KLCI) mth Avg Daily Vol 1.56m 3-mth Avg Daily Value Major Shareholders (%) RM2.12m Sinarmas Harta Sdn Bhd 32.02% Eco World Development 21.29% Liew Tian Xiong 11.27% EPF 8.68% 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% 5.3% Core ROA 5.0% 1.3% 0.6% 1.6% 2.3% *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 Maintain BUY with higher TP of RM1.68. We have increased our Target Price to RM1.68 (from RM1.62) after adding Eco Ardence land at Bukit Raja Klang into our RNAV. Valuation method is unchanged by using Price-to-RNAV (PRNAV) of 0.75x reflecting 0.5SD valuation above mean. Maintain our BUY call due to ECOWLD s leadership in securing property sales, superior earnings growth prospects and strong branding. STRUCTURE OF THE JOINT VENTURE Source: Company 2

3 DAILY PRICE CHART Alan Lim, CFA Source: Bloomberg LOCATION OF THE LAND Source: Company 3

4 ECOWORLD RNAV Landbank/Buildings Location Remaining GDV Methodology Stake Value (RM m) Ongoing Projects Saujana Glenmarie Eco Sky Eco Majestic Eco Sanctuary Eco Botanic Eco Tropics Shah Alam, Selangor 13 WACC 10% 100% 2.5 Jalan Ipoh, KL 338 WACC 10% 100% 57.9 Semenyih, Selangor 9581 WACC 10% 100% 8 Telok Panglima Garang, Selangor 7347 WACC 10% 100% Taman Bukit Indah, Johor 2547 WACC 10% 100% 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) Eco Forest Price (RM/sqft) Value (RM m) Stake Semenyih, Selangor ,462, % Eco Gardens Ijok, Selangor ,172, % Eco Business Park V Ijok, Selangor ,590, % Eco Macalister Georgetown, Penang Island 1 47, % 21.8 Eco Ardence Klang, Selangor ,257, % Total Properties Value Investment Properties 17.3 Fixed Assets Cash Payment for Eco Ardence Land Other Assets (except deferred tax assets)

5 Total Liabilities (excl. deferred tax liabilities) Total RNAV (RM m) No of shares (m) RNAV per share (RM) 2.51 RM RM Fully Diluted No of Shares 7 FD RNAV Per Share 2.24 Discount 25% Target Price (RM) 1.68 Source: Company, MIDF Research Forecast 5

6 KEY FINANCIAL INFO 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% 5.3% Others Core ROA 5.0% 1.3% 0.6% 1.6% 2.3% 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% 6

7 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. 7