Post-land acquisition, Eco World’s total land bank will increase by 13% to 3,460 acres and by 3% to RM56bil in GDV, said Maybank IB.
PETALING JAYA: Eco World Development Bhd’s latest land acquisition in Kulai, Johor, enables the group to replenish its depleting land bank for industrial products thereby increasing it by more than half to 1,198 acres.
Maybank Investment Bank (IB) Research said it is positive on the land deal for its attractive pricing, as the total land cost-to-gross development value (GDV) ratio is 13% while the current asking prices around the area are above RM15 per sq ft (psf).
To recap, Eco World has entered into a conditional sales and purchase agreement with IOI Prima Property Sdn Bhd to acquire 403.8 acres of freehold agricultural land in Kulai for RM211.1mil cash or RM12 psf.
IOI Prima is 99.9% owned by IOI Properties Group Bhd
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The land will be developed into Eco Business Park VI (EBPVI) with an estimated GDV of RM1.58bil, catering to medium and light industrial businesses.
“With this land acquisition, Eco World will be able to replenish its depleting land bank for industrial products, increasing it by 51% to 1,198 acres and by 37% to RM5.8bil in GDV,” said Maybank IB in a report.
EBPVI is slated to be launched by end-2024. Assuming a development period of seven years and pre-tax margin of 18%, the research firm expects EBPVI to churn out an annual net profit of RM31mil starting financial year 2025 (FY25).
Post-land acquisition, Eco World’s total land bank will increase by 13% to 3,460 acres and by 3% to RM56bil in GDV, it added.
Meanwhile, MIDF Research said the acquisition cost of RM12 psf is deemed fair and close to the recent transacted price of industrial land.
“We are positive on the land acquisition as it allows Eco World to expand its industrial development portfolio amid growing demand for industrial properties,” it said.
It noted that the group currently has four business parks under development.
Eco World intends to fund the acquisition through a combination of internal funds and bank borrowings.
MIDF Research said the balance sheet of Eco World is expected to remain healthy at below 0.4 times, as net gearing is expected to go up to 0.36 times from 0.31 times in the second quarter of FY23.
“Meanwhile, we expect the net gearing of Eco World to remain commendable, going forward, as it will receive dividend of RM213.8mil from Eco World International Bhd.”
The land acquisition is expected to be completed by the first half of 2024.
MIDF Research, which has a target price of RM1.02 for Eco World, said it remains positive on the stock due to the stable new sales prospect to be driven by its residential and industrial products.
However, it said the positives have been largely priced in and hence it is maintaining a “neutral” call on the counter.
