Attractive dividend yields in store
? 1HFY10/22 core net profit was in line, contracting marginally yoy by 0.4% on
weaker JV contribution, which offset the impact of lower operating costs.
? 1HFY22 new property sales of c.RM1.9bn made up 54% of the company’s
FY22F new sales target of RM3.5bn.
? Upgrade to Add, given the recent share price retracement and decent FY22-
24F dividend yields of >5%.
Key results highlights
Eco World Development Group’s (EWDG) 1HFY10/22 core net profit was within
expectations, at 47% of our and 45% of Bloomberg consensus’ full-year forecasts.
1HFY22 core net profit declined marginally by 0.4% yoy, mainly dragged down by lower
contribution from JVs (lower proportion of near completed property sold and cost savings
realised for local JV; higher share of loss from Eco World International), which offset the
impact of lower administrative expenses (-11% yoy) and finance costs (-15% yoy). Qoq,
2QFY22 core net profit contracted 30% due to weaker contribution from JVs and higher
tax expense (+16% qoq).
Industrial properties’ demand picked up
1HFY22 new property sales came in at c.RM1.9bn (vs. RM2bn in 1HFY21), representing
54% of EWDG’s FY22F new sales target of RM3.5bn. 7MFY22 new property sales stood
at c.RM2.2bn; key contributors were Eco Majestic (RM347m), Eco Horizon (RM303m)
and Eco Grandeur (RM284m). We observe a strong surge in demand for its industrial
products as business activities picked up after the reopening of borders in Apr 22.
Declares 2 sen interim DPS
EWDG declared a 2 sen interim DPS, within our forecast. The group will likely sustain its
FY22F DPS at similar level as FY21’s 4 sen. Management guided that rising construction
costs/labour shortage have limited impact on its margins, as: i) most its primary
infrastructure at existing townships has been completed, ii) its strata landed projects have
longer handover period of 36 months (vs. normal project’s 24 months), and iii) it plans to
roll out higher-margin products. As at end-May 22, unbilled sales stood at RM3.6bn.
Upgrade to Add
Our TP is lowered to RM0.80, based on a lower FY23F P/BV of 0.45x (-0.5 s.d. of its 5-
year mean P/BV), vs. 0.57x P/BV previously (its 5-year mean P/BV), due to concerns of
rising construction costs and interest rate hikes. We upgrade the stock to Add, given that:
i) its share price has fallen sharply by 22% since end-Apr 22, signaling that market has
largely priced in the negatives from rising interest rates/construction costs, and ii) it is
supported by decent FY22-24F dividend yields of >5%.