EcoWorld certain locked-in sales will cover debt from rapid growth

PETALING JAYA (Oct 12): Eco World Development Group Bhd (EcoWorld) emerged as one of the top developers in the country in just six years but that success was assisted by substantial borrowing, according to a report from The Edge by Liew Jia Teng.

The group was formed by Tan Sri Liew Kee Sin who left S P Setia Bhd in 2014 with a team of people. It took over Focal Aims Holdings Bhd before rapidly growing in the property industry.

Up till today, the group has launched 22,490 properties, sold 19,999 of them and secured cumulative sales of RM18.35 billion while keeping a land bank of 4,467 acres with an estimated gross development value of RM69.254 billion. It made a net profit of RM166 million in its financial year ended Oct 31, 2018 (FY2018).

EcoWorld’s impressive performance, however, had a cost which is reflected in its debt position. As at July 31 (9MFY2019), EcoWorld’s net gearing ratio was 0.75 times although many major developers try not to cross 0.5 times.

While others might feel some concern over the debt level, the group’s CEO Datuk Chang Khim Wah is not worried and believes that it is manageable.

“We appreciate that relative to our peers, many of whom have been in business for decades, our gearing is higher. The relatively higher gearing is due to our rapid growth and expansion as one of the newest property players in the country,” he told The Edge.

Chang highlight the group’s track record, saying it has acquired more than 8,000 acres of land and launched 18 projects in just six years. Many of these projects are in large townships spread out over the Klang Valley, Iskandar Malaysia and Penang.

“Apart from land acquisition, we have invested heavily in infrastructure and amenities to accelerate value creation for our buyers. When you visit any of our townships, you will see the signature EcoWorld DNA that we have promised to our buyers in our brochures is delivered,” he said.

Chang says EcoWorld is mindful of its debt position but it is not unduly worried. He is certain that when future revenue from locked-in sales starts to kick in and cash begins to flow in, the group’s debt is expected to come down over time.

“When investors look at our company, we believe that they should also take into consideration our speed to market, our execution capability, the enhanced value of all our land bank and our ability to continually generate strong sales due to the fundamental desirability of our projects,” he said.

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“We believe our gearing is more than manageable, given our strong sales, high level of future revenue and our ability to quickly respond to market changes and adapt our product offerings to suit the needs of our target market.”

He adds that EcoWorld’s strong financial growth reflects the ongoing translation of its consistently high future revenue into profit.

As at Aug 31, EcoWorld had RM5.859 billion in future revenue from locked-in sales, which provides a clear near and mid-term earnings visibility as well as strong cash flow to enable it to repay its loans.

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