By SHAFIQQUL ALIFF
CGS-CIMB Securities Sdn Bhd expects EcoWorld International Bhd (EWI) to post weaker earnings in the financial year of 2022-2024 (FY22-FY24) due to fewer projects handovers and given the low number of projects in the pipeline currently, while its new launches are only expected to contribute meaningfully from FY25.
The broker’s analyst Ngo Siew Teng noted EWI will likely launch new projects worth up to £470 million (RM2.59 billion) in gross development value at Woking (£350 million) and Oxbow (£120 million) for FY22, while launches at Kew Bridge (c.£240 million) could be delayed to FY23F.
He expects EWI to slip into losses in FY22-24F as lower margins at EcoWorld-Ballymore and higher fixed costs will likely overshadow the contributions of smaller project
handovers from EcoWorld-London. There is no update on the new built-to-rent project at the moment. EWI’s unbilled sales at end-Jan |2022 stood at RM1.1 billion, based on exchange rates of £1:RM5.62 and A$1:RM2.95, Ngo wrote in a report on the company yesterday.
The analyst believes EWI FY22’s new property sales target is achievable, albeit at the expense of margins, given the group is accelerating cash recoupment via the sale of its completed units through attractive incentive packages.
Ngo stated the developer’s first quarter 2022 (1Q22) new property sales came in higher by 21% to RM428 million compared to its previous quarter sales of RM312 million.
“The new property sales target of RM2 billion, mainly driven by the London City Island and Embassy Gardens projects and as of end-Feb 2022, EWI recorded RM685 million of new sales and has a reservation pipeline of RM393 million,” the analyst stated.
Ngo added EWI’s 1Q22 core net loss was wider than expected at RM16 million, (excluding RM1.8 million forex gain and RM0.2 million impairment of goodwill) due to lower-than-expected margins and changes in project launches.
“We and consensus had projected the group to deliver FY22F net profit of RM45 million/net loss of RM22 million.
“Core net loss came in at RM16 million in 1Q22 compared to the previous year’s core net profit of RM72 million, mainly attributed to fewer handovers of properties in Australia and the UK.
“EWI handed over 28 units of Embassy Gardens Block A03 in 1Q22, with the bulk of handovers likely to take place in 2Q22 and 3Q22,” Ngo added.
CGS-CIMB retained its ‘Hold’ call on EWI with a revised target price of 46 sen given the undemanding valuation of less than 0.4% compared to peers at 0.45 times price-to-book value (PBV).
“We use a five-year mean PBV to reflect its trading range pre-and post-lockdowns following business normalisation,” Ngo added.