KUALA LUMPUR: Analysts are positive on Eco World Development Group Bhd
’s acquisition of 847.249 acres of land in Semenyih, Selangor for RM742.4mil.
The developer plans to use the plots for a new mixed development called Eco Forest 2, which is expected to have an estimated gross development value (GDV) of RM4.6bil.
“We view the land acquisition positively as it will increase Eco World's landbank in Semenyih. The new land is next to its Eco Forest township in Semenyih. The township was launched in 2017, catering to first-time homebuyers,” MIDF Research said in a report.
The research house noted that the township has an undeveloped landbank of 136 acres. Hence, the acquisition will allow Eco World to replenish its landbank in Semenyih and further ride on the growing demand for landed houses by first-time homebuyers or upgraders.
“The development on the new land, to be named Eco Forest 2, has an estimated GDV of RM4.6bil. That translates into land cost to GDV ratio of 16% which we deem attractive.
“Meanwhile, the land acquisition price of RM20 psf is slightly higher than RM18 psf paid by Mah Sing Group for the acquisition of 500 acres of land in Semenyih back in June 2023,” MIDF said.
The research house has maintained its earnings forecast for FY24F/25F/26F and a “neutral” call on Eco World.
“We revised our target price for Eco World to RM1.84 from RM1.81 as we updated our RNAV valuation and included RNAV contribution from Eco Forest 2,” it added.
Meanwhile, Maybank Investment Bank Research is also positive on Eco World’s latest land acquisition (847 acres) in Semenyih for its fair pricing.
“The land cost of RM20.1 psf is 11% higher than the last transacted price of RM18 psf paid by Mah Sing in June 2023 but is below the current asking prices of RM25-30psf (for 2-16 acres) in the Broga area.
“More importantly, the new landbank, located next to its existing Eco Forest project, will boost Eco World’s depleting landbank/GDV by +27%/+9% to 3,941 acres/RM55.5bil,” it said.
The research house said the acquisition allows Eco World to continue its success in Semenyih, where it has built its brand name and market share since 2023.
“Assuming a pretax margin of 20% and 10-year development period, we expect Eco Forest 2 to generate an annual net profit of RM56.6mil (1.9sen) from FY26 onwards, based on our back-of-the-envelope calculation,” it said.
It added that positive surprises could arise from securing additional land deals with data centre operators for its industrial parks in Kulai and Klang Valley.
