Getting back on its feet
We visited ECW’s projects in Puncak Alam and Semenyih. We are impressed by how ECW transforms the areas as well as the management team’s creativity (new products such as Co-Home and Ergo Home) and continuous efforts in enhancing the marketability and value of its townships. ECW is looking to improve its profitability via its mature townships. ECW was able to weather the pandemic and now boasts a stronger balance sheet (0.44x net gearing in end 4Q21 vs. peak of 0.79x in 1Q19). We maintain our earnings forecasts and MYR0.93 TP (on 0.6x FY22 PBV). HOLD.
First of its kind
We recently visited Ergo Home at Eco Forest, Semenyih and Co-Home at Eco Grandeur, Puncak Alam. We are impressed by these two first-of-its kind products in Malaysia that are providing first-time home buyers a decent living environment at more affordable pricing and flexibility, as well as providing an alternative to the existing traditional property products. Both Ergo Home and Co-Home are receiving robust responses with average take-up rate of 80-90%.
Reaping the fruits from mature townships
ECW has been spending huge capex on infrastructure, landscaping, marketing and land costs over the last few years, especially in the early days of establishment, and this had led to a stretched balance sheet (peak: 0.79x in 1Q19). However, as most of its townships are maturing (where major infrastructure works are completed), ECW is looking to improve its profitability with greater focus on products with higher margins.
Maintain earnings forecasts
While most developers were being conservative and focusing on clearing inventories/launching traditional housing products during the pandemic, ECW stepped up ahead of the curve and introduced innovative new products to the market, demonstrating its creativity and retaining its position as a market leader. Nevertheless, we maintain our HOLD rating on ECW as share price has already priced in most of the positives at this juncture, we believe. ECW currently trades at 0.5x/0.4x PBV/ PRNAV.