Hot Stock Eco World rises 7.8% on land acquisition, share split, fund raising

by **Cals** Mon 28 Apr 2014, 13:13

Hot Stock Eco World rises 7.8% on land acquisition, share split, fund raising

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Monday, 28 April 2014 11:08

KUALA LUMPUR (Apr 28): Eco World Development Group Bhd rose as much as 7.8% after the property developer announced its proposed land acquisition, share split and fund-raising exercises.

The exercises will enable Eco World to embark on ambitious property development projects and set huge sales targets for the next two years.

At 10.31am, Eco World gained 13 sen or 2.4% to RM5.53. The sixth-largest gainer saw trades of some 1.4 million shares after hitting a high of RM5.82 earlier.

In a note, Kenanga Research said it derived an ex-all fair value (FV) of RM2.27 for Eco World shares. The FV provides a 27% upside to its theoretical ex-all price of RM1.79.

Kenanga, however, did not rate the stock.

Eco World shares have risen substantially over the last one year. Bloomberg data shows the stock had risen to its current level from a intraday low of 37 sen on May 3, 2013.

According to Kenanga analyst Sarah Lim, the FV could increase further to RM2.51.

“This assumes the group fully utilises its placement funds and increases its net gearing to 0.3 times, where consequently this could inflate Eco World’s gross development value by another RM14 billion,” she said.

Lim said she projected earnings for Eco World at RM52 million in FY14, RM203 million in FY15 and RM497 million in FY16.

“Since FY14E earnings may not be representative, we look towards FY15E price- earnings ratio of 20.8 times, which is still at a significant premium to its peer’s average of 11.7 times,” she said.

Furthermore, Lim said Eco World might command a premium if Tan Sri Liew Kee Sin assumes the helm of the company.

“We strongly believe that he will do so in the near future. We expect him to replicate SP Setia’s business model closely, implying that the stock could be trading at premium valuations against its peers.”