KUALA LUMPUR: Eco World Development Group Bhd's (Eco World) core net income of RM70.9 million in the first quarter ended Jan 31, 2024 (Q1FY24) comes in within MIDF Research and consensus' full year expectations, making up 25 per cent and 26 per cent respectively.
MIDF Research, however, downgraded its call for the stock to "Neutral" from "Buy" previously, with a revised target price of RM1.51 from RM1.33 previously, as it believed that the positives have been largely priced in .
"Valuation of Eco World is fair at this level, trading at 92 per cent to its latest NTA of RM1.63 per share. Meanwhile, we continue to see a stable new sales outlook for Eco World, driven by residential and industrial projects," it said.
Sequentially, the group's core net income eased to RM70.9 million, down 19.9 per cent, in line with lower topline which dropped 36 per cent quarter-on-quarter (QoQ).
The lower earnings on sequential basis were due to high base in Q4FY23 which was lifted by earnings recognition of land sale in Eco Business Park II.
Nevertheless, the earnings decline was cushioned by lower marketing and administrative expenses.
On a yearly basis, Q1FY24 earnings were higher at RM70.9 million, up 25.3 per cent year-on-year (YoY).
MIDF Research stated in a note that new sales of Eco World were encouraging with new sales of RM1.26 billion for the first four months in FY24, which made up 36 per cent of management's new sales target of RM3.5 billion for FY24.
"Projects at the southern part of Malaysia contributed 57 per cent of new sales, projects at the central region contributed to 30 per cent of new sales while the remaining 13 per cent of sales were contributed by projects at northern part of Malaysia.
"Meanwhile, Eco World's balance sheet remains healthy with net gearing at 0.28 time in Q1FY24, making Eco World well-positioned to acquire landbank," it said.
The firm maintained its earnings forecast for the group for FY24, FY25 and FY26.