KUALA LUMPUR: CIMB Investment Bank Research has maintained it positive view on Eco World International Bhd (EWI) and expected it to turn profitable in FY18F on the back of handover of units.
“Given its sizeable total unbilled sales of RM7.3bil as at end-Aug, we expect EWI to report a major earnings turnaround in FY18F (from losses in FY17F) as it recognises revenue only upon the handover of its units.
“In our revised numbers, we forecast the RM97mil net loss in FY17F to reverse to a RM182mil net profit in FY18F,” CIMB said.
The research house has maintained its “add” call on EWI with a higher target price of RM1.20.
“The sharp decline in its share price since IPO remains unjustified, in our view. Our target price rises as we roll over our DCF valuation to CY18F and continue to value EWI on par with its RNAV.
“Improving sales performance is the key potential re-rating catalyst. Key risks to our Add call are a weaker pound and disappointing sales,” CIMB said.
The research house said EWI’s latest quarterly results came in “above expectations”.
“EWI posted lower-than-expected losses in 9MFY10/17. 9MFY17 core net loss of RM101mil (excluding forex gains and losses) made up 55% of our and 69% of Bloomberg consensus full-year forecasts, and hence above expectations,” it said.
The lower losses were largely due to lower finance costs arising from the full settlement of group borrowings upon receipt of its IPO proceeds in Apr 2017, and lower JV losses for its ventures in London.
Overall, core net loss declined 25% year-on-year in 3QFY17 and 2% year-on-year in 9MFY17.
EWI achieved RM1.6bil worth of property sales in 10MFY17, or 64% of its unchanged RM2.5bil full-year sales target.
To achieve this target, the group will be ramping up the international roadshows to promote its UK projects, in addition to the marketing campaigns targeting Londoners as they return from their summer vacations.
“Also, the launching of Yarra One in Australia should help to boost sales in 4QFY17, though this could bump-up its marketing expenses for that quarter, in our view,” CIMB said.
EWI expects to officially launch Yarra One in 4QFY17. This is its second residential project in Australia, with a GDV of RM826mil.
“We estimate the inclusion of Yarra One will bump up its total outstanding GDV by 8% from RM13bil to RM14bil,” CIMB said.
The research house has trimmed its FY17F core net loss by 12% and lower its FY18-19F EPS by 14-23% as it now forecast higher marketing expenses as it ramps up its sales for all of its projects in the UK over the next two forecast years.
