CIMB downgrades Eco World Development, lowers target price to RM1.08

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KUALA LUMPUR (Dec 14): CIMB IB Research has downgraded Eco World Development Group Bhd to a Hold from an Add previously on its weaker sales target for next year and slower earnings growth on the back of a subdued property market outlook.

It also lowered the target price to RM1.08 from RM1.42 previous.

In a note today, CIMB said Eco World’s core net profit of RM167 million, which rose 48% year on year, was slightly below house expectations at 94%, although above Bloomberg consensus’ at 105%.

Eco World’s FY18 new property sales also came in lower at RM3.1 billion versus RM4 billion in FY17, missing its target of RM3.5 billion.

Although the company has set a two-year sales target of RM6 billion for FY19 and FY20 without specifying an exact sales target for each year, CIMB said on average, even if Eco World could secure new sales of RM3 billion per annum, this target would still be lower than its FY18 sales.

“We believe the conservative sales target might be due to the lack of sizeable new projects (no new land bank acquisition in FY18) and a weaker property outlook.

“We downgrade Eco World to Hold given: (i) its lower average new sales target of RM3 billion per annum (ii) slower earnings growth in FY19-FY20 versus FY18, and (iii) soft property outlook due to affordability issues, slowing GDP growth, potential interest rate hikes and restrictive government policies,” said CIMB.

Eco World is currently trading up 5 sen or 0.51% to 99.5 sen, with a market value of RM2.92 billion. Over the past year the stock has fallen some 33%.

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