KUALA LUMPUR (March 27): MIDF Research said Eco World Development Group Bhd (EcoWorld) recorded new sales of RM1.346 billion in the first four months of its financial year ending Oct 31, 2023 (FY2023), on track to meet the new sales target of RM3.5 billion for FY2023.

MIDF has maintained its “buy” rating on EcoWorld at 71 sen with an unchanged target price of 87 sen.

In a note last Friday (March 24), the research house said it is positive on EcoWorld due to the property developer's stable new sales outlook which is driven by sales of residential and industrial properties. Besides, EcoWorld's balance sheet is healthy with improving net gearing of 0.3 times from 0.6 times in FY2020.

“Meanwhile, dividend yield is attractive at 7%,” it said.

The research house said EcoWorld’s first quarter ended Jan 31, 2023 (1QFY2023) core net income of RM56.6 million came in within consensus but slightly below MIDF’s expectation, making up 22.5% of consensus and 19% of house's full-year forecast.

It said the slight negative deviation could be attributed to the lower-than-expected contribution from joint venture in 1QFY2023.

“New sales were mainly driven by sales of industrial products as [they] make up 59% [of] total new sales.

“Notably, EcoWorld inked a strategic sale of 92 acres of industrial lands at Eco Business Parks II in Iskandar Malaysia to Haitian Group.

“Meanwhile, sale of residential properties contributed 41% to total new sales. Meanwhile, future revenue increased to RM4.031 billion as at February 2023 from RM3.577 billion as at October 2022,” it said.

Profitabiliy margins

On the group’s profitability margins, MIDF estimates 2023 net profit margin of 10.7%, while forecasting net profit margins of 10.4% and 10.2% for 2024 and 2025 respectively.

At 10.14am, EcoWorld added 0.7% or 0.5 sen to 71.5 sen with 458,000 shares traded.