Eco World Development (ECW) announced its participation in a request for proposal process initiated by Boustead Properties Berhad (BProp) for several agreements to develop 10 parcels of freehold land measuring 847.2 acres. The new land will be held under its 81%-owned subsidiary, Mutiara Balau Sdn Bhd (MBSB), which at the same time, also entered into 2 conditional sale and purchase agreements to acquire the land, for RM742.4m in cash. The remaining 19% in MBSB is owned by BProp. We understand that the land is located in Mukim Beranang and Mukim Semenyih in Ulu Langat, Selangor, next to Eco Forest and near Eco Majestic. With land cost estimated at about 16% of the estimated gross development value (GDV) of RM4.6bn, the acquisition price appears to be fair in our view (with land cost normally averaging about 15%-20% currently). The land, which we understand will be known as Eco Forest 2, will be developed as a mixed residential and commercial development, with deal completion by 1HCY25. All told, no change to our earnings estimates for now and we maintain our Neutral call with TP of RM1.50.

• Earmarked for Eco Forest 2, the land is planned as a mixed residential and commercial development with a preliminary estimated GDV of RM4.60bn. We understand that current sites are planted with over 35-year-old palm trees are no longer suitable for productive use. The land is located next to Eco Forest and near Eco Majestic. To recap, Eco Majestic was launched in 2014 and the first EcoWorld township in Klang Valley, conceptualised as a gated and guarded community for upgraders. Meanwhile, Eco Forest was unveiled in 2017, catering to first-time homebuyers. Together, they span 1,566 acres with RM5.2bn cumulated sales recorded as at 31 August 2024. Currently 28% of its land in that area is still undeveloped, mainly earmarked for commercial development.
• Strategic addition to the Group's landbank. We believe that the new land fits in strategically to the Group's landbank as it is situated in proximity to its successful townships such as Eco Forest and Eco Majestic. Currently, it has close to 9,000 acres of landbank in the Klang Valley, Iskandar Malaysia and Penang, with total GDV exceeding RM80bn. As for funding, we believe it should have no problem financing it with more borrowings or internal funds. The Group's net gearing ratio as at 31 July 2024 was only 0.21x, with cash balances at about RM1.55bn.

Source: PublicInvest Research - 8 Nov 2024