Eco World Development’s (ECOWLD) financial year 2022’s (FY22) core net income of RM231.5 million came in above expectations, making up 111% and 110% of the Street’s expectations. The positive deviation could be attributed to the stronger than expected progress billing in 4QFY22, as MIDF Research stated in its research report on Eco World.
MIDF has excluded mainly impairment loss on investment in a joint-venture (JV) in its core net income calculations. Meanwhile, ECOWLD has announced dividend of 2 sen per share,
bringing total dividend payout to 5 sen per share in FY22 which translates into attractive dividend yield of 7.6%.
Strong earnings in 4QFY22. Sequentially, 4QFY22 core net earnings surged to RM82.1 million (increased by 82.1% qoq), in line with higher topline (up 26% qoq) mainly due to acceleration of progress billing in 4QFY22.
Besides, earnings growth was also supported by higher contribution from JV as a result of higher profit from Eco Grandeur and Eco Ardence. That brought cumulative FY22 core net earnings to RM231.5 million ( down 2.7% yoy) while topline was little-changed. Core earnings were marginally lower in FY22 mainly due to lower contribution from Malaysian JV as some JV projects were at near completion phase.
On the other hand, ECOWLD’s future revenue stood at RM3.6 billion in 4QFY22 while net gearing improved to 0.31x in 4QFY22 from 0.35x in 3QFY22.
New sales target of RM3.5 billion for FY23. ECOWLD recorded new sales of RM3.84 billion for FY22, above its new sales target of RM3.5 billion for FY22. Note that sales in FY22 is also higher than new sales of RM3.5 billion in FY21.
Bulk of the new sales in FY22 were contributed by residential properties at 61%, followed by industrial properties (20%) and commercial properties (12%).
Looking ahead, ECOWLD sets new sales target of RM3.5 billion for FY23 by expanding its residential as well as industrial properties which typically command better margin.
MIDF Research has revised its forecast for financial year 2023 (FY23F forecast) by +7.7% to factor in the higher progress billing. It also has introduced its earnings forecast for FY24. Hence it has revised its TP for ECOWLD from RM0.80 to RM0.87 as we peg narrower discount of 60% from 63% previously due to stable new sales outlook.
The research house has maintained its BUY call on ECOWLD as it sees positive earnings outlook which is expected to support by decent new sales achieved. Meanwhile, dividend yield is attractive at 7.6%.
