Maybank Investment Bank (Maybank IB) is positive on Eco World Development Group Bhd’s (Eco World) latest land acquisition in Iskandar Puteri (IP) as it will help to replenish its depleting landbank in Johor.
The new project, to be named Eco Botanic 3 (EB 3) with with an estimated gross development value (GDV) of RM3.9 billion, is expected to contribute to earnings from 2026.
The research house revised its FY25 and FY26 earnings forecasts to decrease of 0.1% and an increase of 2.4% respectively and upgraded its call to BUY.
“The new land will be developed into a mixed development targeting first-time home buyers and the M40 group. We revise our FY25 and 26 earnings forecasts to factor in the new land assuming 15% PBT margin and 7 years development period.
“Post-land acquisition, the group will have 1,618 acres of land in Johor, which accounts for 26% of its total GDV,” it said.
Maybank IB also assigned a higher RM1.40 TP, which an increase of 30 sen, and a 0.8x PBV from 0.7x.
“The re-rating to reflect Eco World’s leading position in the property space, strong management team and 5% net D/Y,” it added.
Last week, Eco World had entered into a conditional development agreement with Permodalan Darul Ta’zim, controlled by Johor government, where PDT would nominate the group to purchase and develop new land from River Retreat Sdn Bhd (RRSB).
River Retreat is a unit of Iskandar Coast Sdn Bhd, which is 80%-owned by Iskandar Investment Bhd and 20%-owned by Iskandar Waterfront Holdings Sdn Bhd.
Concurrently, the group has entered into a conditional sales and purchase agreement (SPA) with RRSB to acquire 240.3 acres of freehold land in Iskandar Puteri for RM450 million or RM43 per square feet.
“Apart from the land cost, Eco World will have to pay PDT RM30 million nomination fee, payable no later than the fifth anniversary of the
launch date, 20% of the profit after tax (PAT) of each phase of the proposed development,” it added.
Additionally, Maybank IB said it is positive on the land deal due to fair pricing to the group, strategic location with established amenities and staggered payment of the land cost.
“Assuming a pretax margin of 15% for EB3, the implied land cost should be around RM570 million or RM54 per squre feet, including both the nomination fee and 20% profit sharing, resulting in a 15% total land cost-to-GDV ratio.
“The land is next to Eco World Eco Botanic 1 (EB1) and Eco Botanic 2 (EB2), allowing it to leverage on the strong following of Eco World and meet new demand in the area.
“(Finally), the staggered payment of the land cost will lower initial costs and reduce the burden on the group’s balance sheet,” it added.
