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Malaysia Industry Focus

Top pick: MKH. Its large exposure to affordable housing and


landed residential projects in its stronghold Kajang-Semenyih
growth corridor (490 acres), coupled with its low land cost at
prime locations, will make MKH the largest beneficiary of the
KL south migration.

www.dbsvickers.com
ed: SGC / sa: WMT

2.10
3.52
3.18
2.99
4.01
5.08
2.15
2.00

2,863
2,788
1,722
1,039
528
404
218
143

2.20
4.10
3.70
3.80
5.85
6.00
2.25
2.20

(11.8)
20.6
2.6
19.6
22.1
(1.0)
(9.7)
0.0

(30.9)
5.4
(4.2)
51.0
123.0
605.6
(16.3)
2.0

Source: AllianceDBS

Increasing property sales and prices


RMbn
160

Yr 2000=100
220

140

200

120
180

100
80

160

60

140

40
120

20

Value of property transaction

Source: AllianceDBS, NAPIC

2013

2012

2011

2010

100

2009

2008

Follow the infrastructure. The terminal station of the


proposed KL-SG High Speed Rail (HSR) link at Bandar Malaysia
could accelerate migration to KL south given the more
integrated public transport system by then. The MRT Line 2
which has been approved by the cabinet could link southward
to Putrajaya, which would drive more development in
Kajang/Semenyih.

UEM Sunrise Bhd


SP Setia
Sunway Bhd
Eastern & Oriental
Bhd Berhad
MKH
Eco World
Wing Tai Malaysia
Bhd Properties
Hunza

Mkt Cap Target Price Performance (%)


3 mth
12 mth
US$m
RM

2007

Huge price disparity driving KL south migration.


Escalating land prices within Greater KL have reduced the
supply of affordable landed properties, which remain in
demand. The MRT connectivity at Kajang (ready by 2017) and
the ready infrastructure with several highways have made
Kajang/Semenyih the natural choice for developers to expand
township developments. This is supported by the availability of
large tracts of land and these districts recording the among the
strongest population growth in Selangor. The close proximity
to KLCC and Putrajaya federal administrative centre will ensure
KL South continues to thrive.

RM

2006

Price

2005

STOCKS

2004

KL south migration gaining traction, driven by


MRT connectivity, strong population growth, and
larger supply of affordable homes
Kajang-Semenyih growth corridor the most
promising hotspot within Greater KL given
availability of cheap land bank and ready
infrastructure
KL-SG High Speed Rail - the wildcard to shift city
center towards KL South
Top beneficiaries: MKH (high-conviction Buy), Eco
World (Initiate coverage), SP Setia (Upgrade to
Buy)

Analyst
QUAH He Wei, CFA +603 2604 3966
hewei@alliancedbs.com

2003

KLCI : 1,872.97

2002

New urbanization trend:


Evolution of KL South

21 Jul 2014

2001

DBS Group Research . Equity

Refer to important disclosures at the end of this report

2000

Property

house price index

Rating

HOLD
BUY
BUY
BUY
BUY
BUY
HOLD
HOLD

Industry Focus
Property

Table of Contents
QUAH He Wei, CFA

+603 2604 3966


hewei@alliancedbs.com

Why KL South migration?

Map of improved public transport connectivity

Catalyst from major infrastructure projects

Malaysia property market remains healthy

Investment strategy

12

Risks

13

Peer comparison

14

Stock Profiles

17

MKH (High-conviction Buy)

18

SP Setia (upgrade to Buy)

20

Eco World (coverage initiation)

22

MICA (P) 043/10/2009

Page 2

Industry Focus
Property

Why KL South migration?


Escalating land prices within Greater KL have reduced the
supply of affordable landed properties, for which there is still
strong demand. The connectivity of MRT into Kajang (ready by
2017) and the ready infrastructure with several highways, have
made Kajang/Semenyih the natural choice for developers to
expand township developments, with the availability of large
tracts of land bank and the area recording one of the strongest
population growth in Selangor (26% of total transactions).
Greater KL/Klang Valley remains the core of the governments
economic transformation program the government wants to
grow the Greater KL population to 10m by 2020 from an
estimated 7m currently. This means the Greater KL population
has to grow by 5.2% p.a. on average, much higher than the
national average of ~1.4%. If the goal materializes, this would
translate into stronger demand for housing of 80k units p.a. in
Greater KL alone vis--vis 78k units completed for the whole
country in 2013.
Greater KL economic growth driver

Selangor

Population Density
(m)
(ppl/sq km) Urbanisation
5.46
674
91.4%

KL

1.67

6,891

100%

Putrajaya

0.07

1,478

100%

Malaysia

28.3

86

Housing demand in Greater KL is likely to remain healthy going


forward, but buyers will be picky because of steep pricing, no
thanks to a slew of cost-push factors including inflationary
pressure, subsidy rationalisation, and implementation of
minimum wages. Faced with the risk of margin compression,
property developers will naturally look to landbank in areas
where land cost is relatively low, and there is ready
infrastructure and a growing population.
The construction of the MRT Sg. Buloh-Kajang line has drawn
interest to the Kajang/Semenyih growth corridor which is
located within the Hulu Langat district, Selangor, because of
the availability of vast land bank there. The 51-km MRT line will
have 31 stations including 16 with park-and-ride facilities and
four interchange stations. The line will link Sungai Buloh in the
northwest and Kajang in the southeast.
Indeed, the much-needed catalyst three MRT stations within
Kajang - has driven several public-listed property developers to
grab land in the area. Other major developers such as SP Setia,
Mah Sing, UEM Sunrise, Eco World, and Tropicana, have also
jumped on the bandwagon as the areas gains recognition as
strategic townships at a relatively comfortable distance from KL
city center, that offer affordable housing and ready
infrastructure:
i)

71%

Source: AllianceDBS, Department of Statistics

Greater KL prices much higher than national average


RM'000
900
800
700
600
500
400
300
200
100
-

Education hub: there are several education institutions in


the vicinity, including New Era University College, Universiti
Kebangsaan Malaysia, Universiti Putra Malaysia,
Nottingham University campus, Universiti Tenaga Malaysia,
the German Malaysia Institute, and the Australia
International School;

ii) Easy access with the opening of several highways that link
Kajang/Semenyih to other major townships within Klang
Valley. These include the Kajang SILK Highway and
Persiaran Kajang-Semenyih. Other links to the area are
Lebuhraya Utara Selatan, Lebuhraya Cheras-Kajang and
Lebuhraya Klang Selatan; and
2006

2007
KL

2008
2009
2010
Putrajaya
Selangor

Source: AllianceDBS, NAPIC

2011
Msia

2012

2013

iii) Strong population growth driven by urban migration.


According to Department of Statistics data, Kajangs
population was close to 800,000 in 2010, or 15% of
Selangors population of 5.4m. The local town council
(MPKj) expects Kajangs population to exceed 1m by 2013.

Page 3

Industry Focus
Property

Public-listed developers rushing to buy land in Semenyih/Kajang


Da te
02-Jul-14
25-Apr-14
21-May-12
01-Mar-12
03-Oct-11
08-Sep-11
05-Sep-11
06-Dec-10

B u ye r
Eco World
Eco World
Mah Sing
Knusford
SP Setia
Ireka Corp
Tropicana Corp
UEM Sunrise

Si z e
RMpsf
(a c re ) R M m
492.7
225.3
10.5
1,073.1
950.0
20.3
412.0
333.3
18.6
13.3
14.2
24.5
673.3
381.3
13.0
20.6
22.4
25.0
198.5
228.0
26.4
463.5
268.5
13.3

Lo c a ti o n
Semenyih
Semenyih
Bangi
Semenyih
Semenyih
Kajang
Semenyih
Bangi

R e ma rks
near Bandar Rinching
near Bandar Rinching
3.2km away from UKM
near Taman Kajang Perdana and Taman Jelok Impian
13km south of Kajang in Rinching
within Bukit Angkat Industrial Zoning
Kajang Hills
near Bandar Seri Putra

Source: AllianceDBS, Companies

Land prices in KL Northern areas such as Sg. Buloh, Petaling


Jaya and Kota Damansara have long been valued at a premium
to KL Southern areas. But the MRT line will change the
dynamics, it will revitalise the Kajang/Semenyih corridor. In
fact, land prices in Kajang/Semenyih have almost tripled
compared to 3-4 years ago, albeit coming from a low base.
Huge disparity in land price between North and South
of KL for parcels near MRT stations

Are a

Sg. Buloh

Es t. la nd
pric e
RM ps f
200-300

Es t.
prope rty
AS P
RM ps f
600-700

Kota Damansara

200-300

600-700

Pusat Bandar
Damansara
Dataran Sunway

1300-1800

1450

Kajang city

350-450
80-100

De ve lope r

Mah Sing,
Selangor Dredging
Meda Inc
Guoco Land

1000-1200 Tropicana
350-450

MKH

However, there is a stark contrast in property prices between


the two areas, in favour of the northern region. We believe the
completion of the MRT Sg Buloh-Kajang Line will reduce the
disparity as property buyers will likely decide mainly on price
then.
Also, property affordability is increasingly an issue for the
general public with prices surging in recent years and demand
outpacing new supply of houses by a large margin, particularly
for low-to-medium cost units.
Population in Selangor
Dis trict in S e la ngor
Gombak

Klang
Kuala Langat
Kuala Selangor
Petaling
Sabak Bernam
Sepang
Hulu Langat
Ulu Selangor

668,694
842,146
220,214
205,257
1,765,495
103,709
207,354
1,138,198
194,387

Source: AllianceDBS, Various


Source: AllianceDBS, Department of Statistics

We compare Kajang (in Hulu Langat district) and Sg. Buloh (in
Petaling district) because these two areas have similar
demographics and public transport connectivity. Kajang and
Sg. Buloh are among the most populous districts in Selangor,
and the existing KTM railway runs through both areas.
Similarly, the terminal stations of the MRT line which will be
ready by 2017 will be located at Sg. Buloh and Kajang.

Page 4

Industry Focus
Property

Hulu Langat property prices catching up with Petaling


2000=100
220
200
180
160
140
120

We noticed Hulu Langat district terrace house prices have


consistently outperformed those in KL and Petaling district,
which is most likely due to the huge price disparity. Based on
National Property Information Center (NAPIC) 1Q14 data,
average price of terrace houses in KL and Petaling district are
121% and 65% higher than those in Hulu Langat. Therefore,
we believe the huge price difference is expected to drive more
property buying interest to Kajang/Semenyih growth corridor
where lifestyle gated-and-guarded developments have been
mushrooming due to the strong demand.

Selangor

Petaling

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

100
Hulu Langat

Source: AllianceDBS, NAPIC

Wide disparity for terraced house price


RM/unit
700,000
650,000
600,000
550,000

Indeed, since the announcement of the MRT Sg. Buloh-Kajang


Line, demand for landed properties in Kajang/Semenyih has
been rising. Property sales have been resilient, driven by the
strong population growth in the second most populous district
in Selangor. The KL South migration is imminent; major
developers in Kajang/Semenyih rushing to buy land there
reinforces our view that this will be one of the best hotspots in
the years to come, possibly more visible when the MRT stations
are completed by 2017.

500,000
450,000
400,000

Hulu Langat properties sell like hot cake

350,000

La u n c h
Sep13
Oct13
Nov13
Feb14
Apr14
May14

300,000

Petaling

Hulu Langat

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

250,000
200,000

KL

Source: AllianceDBS, NAPIC

25%
20%
15%
10%
5%
0%

Petaling

Hulu Langat

KL

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

-5%

2Q11

Pri c e /
unit
>280k
>450k
>900k
>740k
>290k
>590k

Developers are still launching high-priced products and fewer


affordable projects, as land prices within Klang Valley have
risen sharply that it is no longer feasible to launch affordable
housing. The MRT network reaching out to Kajang has also
reshaped public perception on residential projects in
Kajang/Semenyih; they were previously associated with long
travel distance from KL city center.

30%

1Q11

Ta ke
De ve l o p e r
up
Typ e
Mah Sing
>90% high rise
SP Setia
>90% landed
Country Garden-Mayland
>80% landed
Tropicana
>90% landed
MKH
>80% high rise
Eco World
>80% landed

Source: AllianceDBS, various

Hulu Langat terraced house price growth outperform

Source: AllianceDBS, NAPIC

Pro j e c t
Southville City
Setia Eco Hill
Diamond City
Tropicana Heights
Saville Kajang
Eco Majestic

The availability of landed properties in Kajang/Semenyih at


lower prices than in other established townships such as
Petaling Jaya and Kota Damansara and good public transport
connectivity, appeal most to the general public. An additional
advantage is the close proximity to Putrajaya federal
administrative center, which has contributed to robust property
sales in the area. Upgraders from Cheras, Putrajaya and
Cyberjaya also naturally look at Kajang/Semenyih when it
comes to buying gated and guarded residential projects with
lifestyle amenities.

Page 5

Industry Focus
Property

Ripe for KL south migration with improved infrastructure

Possible MRT Line


3 (circle line)
allignment
KLCC

KL-SG HSR
terminal station

MRT Line 1
(under
construction)

LRT extension
alignment (under
construction)

Possible MRT
Line 2
alignment

Source: Ho Chin Soon Research, AllianceDBS

Page 6

Industry Focus
Property

More catalyst from major infrastructure projects


MRT Line 2 gets green light from federal government. This line
will link Sg. Buloh and Putrajaya in the South. We expect the
contracts to be awarded by 2H15. Although the alignment has
yet to be finalised, proposals to extend the line to areas like
Serdang and Putrajaya could help to drive KL South migration.

The decision to place the Malaysian terminal at Bandar Malaysia


in Sungai Besi, at the current site of the Royal Malaysian Air Force
base, is a welcome surprise for KL South migration, as there
could be spillover effects on the Malaysian property sector.

The positive impact of an integrated HSR and MRT Line 1 and 2


The combined coverage of MRT Line 1 and 2 will create a huge
in the future is likely to benefit Kajang/Semenyih the most, since
catchment area to further spur property development in the area. it is coming from a relatively lower base than more established
Malaysias most modern public transport mode will enable the
townships in Greater KL.
residents to reach major destinations within Greater KL with
relative ease. The appeal of better quality of life at relatively
lower price in the Kajang/Semenyih growth corridor will
transform the property landscape there.
Transit-oriented developments (TODs) are also positioned to take
off strongly with the extension of MRT connectivity to KL South.
The convenience of TODs has not been fully appreciated by the
public vis--vis property buyers in Singapore and Hong Kong, as
this single largest infrastructure project is a first for Malaysia.
High Speed Rail.
ail The ambitious High-Speed Rail (HSR) project due
for completion by 2020 would reduce the journey from
Singapore to Kuala Lumpur to just 90-minutes, from up to 4.5
hours currently. The location of the terminal in Singapore has yet
to be finalised, but it has been reported Bandar Malaysia would
house the terminal station in Malaysia.
There are plans for the 330km line to make stops in Negri
Sembilan, Malacca and Johor, which could extend the journey
time to 2 hours, but this is still preliminary. We understand the
Malaysian government is conducting technical surveys, socioeconomic analyses on the proposed stations, and the proposed
alignment, among others. The HSR service is expected to boost
travel between the two countries and result in significant
economic gains for both.

Page 7

Industry Focus
Property

Developers with exposure to KL South

De ve lope r Proje ct

L a nd
( a c re )

MKH
Tropicana
SHL
SP Setia
Eco World

Various
491
Tropicana Heights
199
Bandar Sg. Long
328
Setia EcoHill
1,447
EcoMajestic
1,566
One South,
Hua Yang
Mines South
22
Serene Heights,
UEM Sunrise Sinaran Hills
513.6
Mah Sing
Southville City
428

% of
la nd
ba nk

44%
10%
55%
30%
32%

% of
tota l
% of
L oc a tion
GDV
GDV
RNA V Re ma rk s
( RM m) ( RM m)
Kajang/Semenyih, Cheras,
Various projects including Kajang 2,
Seri Kembangan
5,087
69% 46% Pelangi Semenyih, Hillpark Homes
Kajang
1,456
2% n.a. township development
Sg. Long
n.a.
n.a. 50% Include 160-acre golf course@Sg. Long
Bandar Rinching, Semenyih 7,360
11%
6% township development
Bandar Rinching, Semenyih 14,640
31% 14% township development

3% Seri Kembangan
7% Bangi, Kajang
15% Bangi

1,035

n.a.

n.a. mixed development

3,270
8,300

4%
32%

2% residential projects
n.a. township development

Source: AllianceDBS, Various, Companies

Our ground checks revealed that property projects within


Kajang/Semenyih have been doing exceptionally well. The
presence of established developers such as SP Setia, MKH,
Tropicana, Eco World and Mah Sing, supports our optimistic
outlook for property developments in an area that had been
overlooked by property buyers previously because of perceived
haphazard planning, lack of quality products, and weaker
infrastructure.
Gated and guarded landed properties are the main attractions
for genuine buyers/upgraders because of relatively more
attractive pricing. This type of products are increasingly beyond
the affordability of young working adults in other prime areas
of Greater KL, as developers price in rising construction costs
and land prices.
The Kajang/Semenyih/Bangi areas provide golden opportunity
for developers to tap into the strong demand for landed
properties, because of the availability of large tracts of land
bank in the area. This is virtually the last area within Greater KL
that is still available at reasonable prices, yet offer strong
growth prospects as the improving infrastructure and facilities
would enhance its appeal.

Page 8

Kajang/Semenyih will be the next hotspot going forward. For


property developers, the resilient demand for landed properties
will create a more stable market vis--vis high-end condo
projects which are heavily dictated by market sentiment.
Typical bread-and-butter terrace houses have been selling well
over the years as supply and demand are driven by sector
fundamentals.
We understand that MKH, one of the oldest names in
Kajang/Semenyih, has never employed the developers interest
bearing scheme (DIBS) incentive to sell their products, even
during the down cycle when many developers in town
introduced that to address slowing sales. This is strong
testament to the booming yet resilient property sales in the
growth corridor, the dynamics greatly enhanced by the MRT
connectivity.

Industry Focus
Property

Malaysian property market remains healthy

and a gross national savings-to-gross national income ratio of


31%.

Despite the relatively weaker property sentiment due to


tightening measures, property prices remain at record highs as
supply continue to lag demand. Property demand in Malaysia is
supported by favourable demographics - young and growing
population (and labour force), increasing urbanisation, and
shrinking household size. The Malaysian economy is expected to
grow by 5.3% in 2014 (vs 4.7% in 2013), while unemployment
rate is healthy at 3%.

Healthy gross domestic savings


60%
50%
40%
30%
20%

Relatively healthy economic indicators


20%

45%
40%

15%

35%

10%

30%
25%

5%

20%

0%

15%
2008

2009

2010

2011

2012

2013

-5%

10%
5%

-10%

0%
GDP growth (LHS)

GNI growth (LHS)

Savings % (RHS)

Source: AllianceDBS, BNM

Lower impaired loan ratio despite rising household


debt
RMbn
2,000

3.0
2.5
2.0

1,000

1.5
1.0

500

0.5
0

0.0
2009

2010
2011
2012
HH debt (LHS)
HH financial asset (LHS)
impaired loan ratio of HH sector (RHS)

0%
Indonesia Singapore Thailand

Malaysia Philippines

Source: AllianceDBS, World Bank

Meanwhile, non-performing loans for residential property


mortgage have been improving over the years. The gross
residential mortgage loan NPL ratio has improved from 3.5% in
2010 to 1.5% recently. We understand banks have been more
cautious with loan approvals, as some property buyers have been
facing difficulty in getting mortgage loans. Nevertheless, loan
applications and approvals have started to pick up in recent
months.
Mortgage NPLs trending down

%
3.5

1,500

10%

2013

Source: AllianceDBS, BNM

RMbn
16
14
12
10
8
6
4
2
0
(2)
(4)
Dec-04 Mar-06 Jun-07
Gross NPL

10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Sep-08 Dec-09 Mar-11 Jun-12
Chg NPL

Sep-13

Mortgage NPL%

Source: AllianceDBS, BNM

There are concerns rising household debt could pose a serious


threat to the economy, but more stringent lending guidelines
adopted by financial institutions could help to ease the pressure.
Household debt also grew at a slower pace of 11.7% in 2013,
compared to 13.5% in 2012. We believe the risk of a property
bubble is well contained by strong fundamentals in Malaysias
economy and a robust banking system. Overall household
financial health is stable as indicated by 45% household gearing

Page 9

Industry Focus
Property

Affordability supported by cheap financing


RM'000
700

(x)
8
7

600

500

400

The rate hike was due to BNM concern over the risk of broader
economic and financial imbalances that could undermine the
growth prospects of the Malaysian economy. Should there be
more interest rate hike in tandem with the growing economy, it
is unlikely to adversely affect property sales growth judging by
historical trend though consumer sentiment may be affected.

4
300

200

affordable house price (LHS)

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

100

affordability ratio (RHS)

Source: AllianceDBS, BNM

Despite the rapid increase in property prices in recent years,


affordability remains healthy thanks to the low financing rates
and rising household income. We note that 87% of the value of
residential property transactions in 2013 were priced below
RM500,000, and Malaysia still has the lowest house price-toincome ratio in the region.

We believe property prices are likely to remain steady at current


levels, after the steep appreciation over the past few years. The
supply deficit will continue to support prices as the young labour
force (60% below 40 years old) will be seeking residential
properties. Newly completions have ranged from 65k-80k units
p.a. in recent years, while Malaysia household formation has
exceeded 100k p.a., underpinning strong demand for properties.
Demand is further supported by easy access to credit.
Property prices reaching all-time high
2000=100
240
220
200
180

Malaysias house priceprice-toto-income still lowest in the region

160
140
120

All

Terraced

High-rise

Detached

3Q13

4Q12

1Q12

2Q11

3Q10

4Q09

1Q09

2Q08

3Q07

4Q06

1Q06

2Q05

3Q04

4Q03

1Q03

2Q02

3Q01

4Q00

1Q00

100

Semi-D

Source: AllianceDBS, NAPIC

Healthy inventory levels


KL

Source: URA, Singstat, Demographia, Bank of Thailand, BNM

The recent interest rate hike of 25 basis points is unlikely to cause


a major slowdown in the property market. A 25 basis point
increase in the base lending rate would lift a 30-year RM500k
mortgage loan instalment payment by RM74/month, an increase
of only 3% over the current monthly instalment of ~RM2,445.
Nevertheless, sentiment may be affected temporarily after rates
are adjusted by commercial banks.

Page 10

S e la ngor

Existing Stock
424,324
% of Msia
9%
Completions
1,281
% of stock
0%
Incoming supply 52,714
% of stock
12%
total unsold
Unsold/stock

Johor

Pe na ng

Othe rs

M a la y s ia

1,358,054

705,929

29%

15%

377,942 1,852,285

8%

39%

4,718,534

100%

19,003

12,402

12,583

32,996

78,265

1%

2%

3%

2%

2%

149,644

118,191

64,482

311,526

696,557

11%

17%

17%

17%

15%

8,567

11,935

15,385

2,259

27,429

65,575

2.0%

0.9%

2.2%

0.6%

1.5%

1.4%

Source: AllianceDBS, NAPIC

Industry Focus
Property

Rising construction cost


180
170
160
150
140
130
120
110
100
90

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14

80

Source: AllianceDBS, Langdon Seah

Cost-push factors such as rising construction cost and the


implementation of 6% Goods & Services Tax (GST) effective
Apr15 will continue to create upward pressure on selling prices.
New tenders for construction contracts have been seeing higher
quotations, partly due to intense competition for raw materials
and labour with the rollout of mega infrastructure projects in
Malaysia. We understand property developers have started to
factor in GST in selling prices for new projects.
The sticky prices could translate into softer demand for certain
properties, but demand for landed properties is likely to remain
resilient although there will be limited supply of affordable units
in view of the escalating land prices within Greater KL. The
scarcity of large tracts of land bank in prime areas has also
resulted in developers opting to build high-rise projects to
optimize yields (gross development profit/acre).
Other challenges include the increasing compliance cost. These
include bumi discount/quota (5-15%/30-60% depending on
location and land status), low-medium cost housing quota (3050% depending on land size), and government reserve/public
area, which have led to cross-subsidy of products. We
understand developers incur ~RM100k losses/unit for each lowcost house built because the RM42k cap implemented by the
government has stayed despite rising construction costs.

Page 11

Industry Focus
Property

Investment strategy
Despite generally weaker sentiment in the property market,
property sales in Kajang/Semenyih growth corridor has been
outperforming those in more established townships within
Greater KL. We like the mass-market township developments
in Kajang/Semenyih, for which demand will remain resilient
with the improvements to overall infrastructure as well as
public transport connectivity.
MKH and Eco World will be among the largest beneficiaries of
the booming Kajang/Semenyih growth corridor, as the
potential GDV from their land bank account for 69% and
31%, respectively, of their overall GDV in the pipeline.
Promising sales at their projects will underpin long-term
earnings visibility.
The undisputed advantage of cheaper land cost - to supply
landed properties - in the area will ensure property and land
prices converge rapidly towards average prices in KL. This
could create a multi-year re-rating for both MKH and Eco
World which enjoy strong branding.

MKH is on track to achieve its record high property sales target


of RM800m for FY14 (vs RM580m in FY13). It booked
RM410m sales in 1HFY14, of which RM96m is pre-sale
booking. This has yet to include overwhelming sales from
Saville@Kajang (RM280m GDV) which has achieved impressive
80% take-up although the project was only launched in April.
As a result, unbilled sales is at an unprecedented RM602m as
at March, or 1.3x its FY13 property revenue.
Record high unbilled sales
RMm
700
600
500
400
300
200
100
0

Top/High
Top/High conviction pick: MKH.
MKH The company will be the
largest beneficiary of the upcoming MRT connectivity given its
high exposure to the booming Kajang/Semenyih growth
corridor. MKH is a rare gem that offers both deep value and
strong earnings growth
MKH has an unrivalled competitive advantage in
Kajang/Semenyih property development because of their low
land cost of RM10psf (vs peers >RM20psf). Affordable homes
- MKHs stronghold - remains the key theme for the property
sector. Their large tract of prime property land bank in
Kajang/Semenyih (490 acres) makes them the prime
beneficiary of rising land prices there. Scarcity of land within
Kajang also provides a distinct advantage for MKHs future
launches, which are expected to see strong demand and fetch
premium pricing.

Page 12

FY10

FY11

FY12
unbilled sales

FY13

2QFY14

Source: AllianceDBS, Company

Initiate coverage:
coverage: Eco World (BUY, RM6.0
RM6.00 TP).
TP) Eco World has
been gaining prominence in Malaysias property market, as the
new company is backed by a solid ex-SP Setia management
team that have a proven and impeccable track record during
their tenure in SP Setia. The company is in the midst of a major
corporate exercise to be completed in 3Q14, which will turn
the company into a large scale developer with 4.4k acres of
land bank that could generate RM43.5bn GDV.
Eco World has direct exposure to the Kajang/Semenyih growth
corridor through 1,566 acres of land bank in Semenyih which
has the potential to generate RM14.6bn GDV. Managements
impressive execution track record is the strongest confidence
bestowed by the general public towards its property projects.
Eco Worlds EcoMajestic@Semenyih received overwhelming
st
response for the 1 phase, Cradleton, where more than 2,000
property buyers queued on launch day to grab the 612 units
available for sale at end May.

Industry Focus
Property

Eco World may bring forward subsequent phases of


EcoMajestic in view of strong demand for its landed products,
despite the premium pricing starting at RM586k/unit for a
terrace house. Property sales should gain momentum as more
of its eco-themed projects are introduced to the market.
The company is on track to achieve its RM5bn sales target over
FY14-15 given its presence in Malaysias property hotspots in
the Klang Valley, Iskandar Malaysia, and Penang. We project
the company will achieve 3-year earnings CAGR of 102% over
FY13-16F
Land bank upon completion of corporate exercise
En l a rg e d l a n d b a n k Ac re s
GDV (R M m)
Ec o Ce n tra l Saujana Glenmarie
25.9
90
Eco Sky
9.6
974
Eco Majestic
1073.1
11,144
Eco Sanctuary
308.7
8,000
1 4 1 7 .3
2 0 ,2 0 8
Ec o So u th Eco Botanic
325.1
3,794
Eco Spring
613.8
5,871
Eco Tropics
743.6
3,400
Eco Business Park 1
612
3,799
Eco Business Park 2
383.6
3,009
Eco Business Park 3
248
2,000
2 ,9 2 6
2 1 ,8 7 3
Ec o No rth Eco Terraces
12.8
338
Eco Meadows
75.7
916
Eco Macalister
1.1
190
8 9 .6
1 ,4 4 4
4 ,4 3 3

4 3 ,5 2 5

SP Setias prime 4,782-acre land bank (RM71bn GDV) has low


holding cost, which means the company stands to benefit the
most the steep land price appreciation in recent years.
Therefore, SP Setia is poised to benefit from resilient demand
for its established township developments in Setia Alam (712
acres undeveloped; RM3.50psf land cost) and Setia Eco Hill
(1,447 acres; RM10.6psf) which should continue to see strong
sales.
We believe the concern over SP Setias management departure
has been priced in and the overhang has now been removed
after the departure of its CEO. Re-rating catalyst could come
from potential M&A exercise which is likely to be done above
put option exercise price granted to Tan Sri Liew Kee Sin at
RM3.95/share.
Risk
Margin compression. Developers may not be able to pass
through to property buyers the incremental costs resulting
from rising land prices and construction costs, as the market
may not be receptive of higher selling prices in view of record
high house prices. We understand there is also labour shortage
in some areas such as Iskandar Malaysia where the situation is
more severe, which will result in contractors demanding higher
quotations for construction works.
Slowing sales.
sales Property sales may slow down in certain
locations as property buyers could be deterred by the high
entry price and tightening measures, with banks adopting
more cautious lending practice for mortgage loans.

Source: AllianceDBS, Company

SP Setia (Upgrade to BUY,


BUY, TP RM4.10).
RM4.10). SP Setia will be one of
the beneficiaries of the rising prominence of KL South, through
it 1,447 acres of undeveloped land bank in Semenyih which
was acquired in 2011 at a blended cost of RM10.6psf. Setia
Eco Hill launched in Oct13 was met with astounding success;
the project had more than 26,000 registrants for 760 units on
offer during the launch. We understand the ballot numbers
were snapped up within five hours, and over 2,000 people
turned up for the sales launch.

Rising household
household debt.
debt The unprecedented household debt
level could strain purchasing power and demand for future
properties, in view of rising inflationary pressure and the
impending interest rate hike which will lower disposable
incomes.

The companys fundamentals remain solid given its record high


unbilled sales of RM11.2bn, which translates into 4x FY13
property development revenue. Therefore, we project SP Setia
to deliver 3-year earnings CAGR of 18%. Also, SP Setia
remains one of the largest developers in Malaysia with sizeable
prime land bank that was acquired at relatively lower prices
few years ago.

Page 13

Industry Focus
Property

Peer comparison
Company

FYE

Rating

Price

TP

Market
cap

P/RNAV

PE
CY14

CY15

PB
CY14

CY15

ROE
CY14

CY15

UEM Sunrise
SP Setia
Sunway
E&O
MKH
Eco World
Wing Tai M'sia
Hunza

Dec
Oct
Dec
Mar
Sep
Oct
Jun
Jun

Hold
Buy
Buy
Buy
Buy
Buy
Hold
Hold

2.10
3.52
3.18
2.99
4.01
5.08
2.15
2.00

2.20
4.10
3.70
3.80
5.85
6.00
2.25
2.20

9,529
8,876
5,482
3,307
1,682
1,287
676
456

52%
40%
23%
33%
33%
32%
52%
59%

17.5
18.8
10.9
30.0
11.3
n.m.
7.6
18.6

24.1
13.9
9.1
20.7
7.9
34.1
5.7
8.1

1.5
1.5
1.0
2.2
1.5
1.3
0.6
0.5

1.4
1.5
0.9
2.0
1.3
1.3
0.6
0.5

8%
8%
9%
7%
14%
1%
8%
3%

6%
10%
10%
10%
17%
4%
10%
7%

Average

40%

16.4

15.5
15.5

1.3

1.2

7%

9%

MKH PB band

MKH PE band
(x)

1.6

12.0

(x)

1.4

0.4

-1 std dev
-2 std dev
Jan-10

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

0.0

Jan-11

0.0

Jul-10

0.2

Jan-10

2.0

Jul-14

-2 std dev

4.0

Average

Jan-14

0.6

Jul-13

-1 std dev

6.0

+1 std dev

Jan-13

0.8

Jul-12

1.0

Average

Jan-12

+1 std dev

Jul-11

8.0

+2 std dev

Jan-11

1.2

Jul-10

10.0

+2 std dev

Eco World PB band

Eco World PE band


(x)

1.6

45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0

(x)

1.4
+2 Std dev

1.2
+2 Std dev

1.0
+1 Std dev

0.8
+1 Std dev

0.6
Average

0.4
Average

0.2

Page 14

Apr-14

Oct-13

Apr-13

Oct-12

Apr-12

Oct-11

Apr-14

Oct-13

Apr-13

Oct-12

Apr-12

Oct-11

0.0

Industry Focus
Property

SP Setia PB band

SP Setia PE band
(x)

(x)

2.2

22.0
+2 std dev

2.0

+1 std dev

1.8

Average

1.6

14.0

-1 std dev

1.4

12.0

-2 std dev

1.2

+2 std dev

20.0
18.0
16.0

+1 std dev
Average
-1 std dev
-2 std dev
Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jan-10

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-10

1.0

10.0

UEM Sunrise PB band

UEM Sunrise PE band


(x)

(x)

3.5

45.0

3.0

40.0
+2 std dev

35.0
30.0

+2 std dev

2.5

+1 std dev

+1 std dev

Average

2.0

25.0

Average

-2 std dev
Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

1.0
Jan-10

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-14

-2 std dev

10.0

1.5

Jan-11

-1 std dev

15.0

-1 std dev

Jul-10

20.0

Wing Tai Malaysia PB band

Wing Tai Malaysia PE band


(x)

0.9

(x)

12.0
0.8

10.0

+2 std dev

8.0

+1 std dev

6.0

Average

4.0

-1 std dev

2.0

-2 std dev

+2 std dev

0.7

+1 std dev

0.6

Average
0.5
-1 std dev
0.4

-2 std dev

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jan-10

0.3

0.0

Page 15

Industry Focus
Property

Hunza Properties PB band

-1 std dev

Jul-14

Jan-14

Jul-13

-2 std dev

Jan-10

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

-1 std dev

Average

Jan-13

Average

+1 std dev

Jul-12

+1 std dev

+2 std dev

Jan-12

+2 std dev

(x)

Jul-11

45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0

0.7
0.7
0.6
0.6
0.5
0.5
0.4
0.4
0.3
0.3
0.2

Jan-11

(x)

Jul-10

Hunza Properties PE band

E&O PB band

E&O PE band
(x)

2.5

(x)

60.0
2.0

50.0

+2 std dev

40.0

+2 std dev

30.0

+1 std dev
Average

20.0

-1 std dev
10.0

1.5

+1 std dev
Average

1.0

-1 std dev
-2 std dev

0.5

-2 std dev
Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jul-10

Jan-10

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jan-11

0.0

0.0

Sunway PB band

Sunway PE band
(x)

1.2

14.0
+2 std dev

12.0

+1 std dev

10.0

(x)

1.1

+2 std dev

1.0

+1 std dev

0.9

8.0

Average

6.0

-1 std dev

4.0
-2 std dev

2.0

Average

0.8
0.7

-1 std dev

0.6

-2 std dev

Page 16

Feb-14

Aug-13

Feb-13

Aug-12

Feb-12

Feb-14

Aug-13

Feb-13

Aug-12

Feb-12

Aug-11

Source: AllianceDBS, Companies, Bloomberg L.P.

Aug-11

0.5

0.0

Industry Focus
Property

Stock Profiles

Page 17

Company Focus

MKH Bhd
Refer to important disclosures at the end of this report

Bloomberg: MKH MK | Reuters: METR.KL

BUY RM4.01
RM4.01 KLCI : 1,872.97

Best proxy to booming Kajang

Price Target : 12-Month RM 5.85


Potential Catalyst: Stronger property sales and FFB production
AllianceDBS vs Consensus: First to cover the stock
Analyst
QUAH He Wei, CFA +603 2604 3966
hewei@alliancedbs.com

RM

R e la tiv e In d e x
434

3 .6

384

3 .1

334

2 .6

284

2 .1

234

1 .6

184
134

1 .1
0 .6
J u l-1 0

J u l-1 1

M K H B h d (L H S )

J u l-1 2

84
J u l-1 4

J u l-1 3

R e la t iv e K L C I IN D E X (R H S )

Forecasts and Valuation


FY Sep (RM m)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (sen)
EPS Pre Ex. (sen)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (sen)
Net DPS (sen)
BV Per Share (sen)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Earnings Rev (%):
Consensus EPS (sen
sen):
sen :
Other Broker Recs:

2013A
2013A
688
183
136
103
119
24.7
28.4
15
63
24.7
7.5
272.4
16.3
14.1
15.4
11.4
1.9
1.5
0.4
12.0

2014F
2014F
775
208
184
135
135
32.3
32.3
31
14
32.3
8.3
253.1
12.4
12.4
7.5
9.7
2.1
1.6
0.3
13.4

2015F
2015F
983
287
261
191
191
45.5
45.5
41
41
45.5
8.3
290.2
8.8
8.8
10.9
7.0
2.1
1.4
0.3
16.7

2016F
2016F
1,374
403
377
275
275
65.7
65.7
44
44
65.7
12.5
347.5
6.1
6.1
9.3
4.9
3.1
1.2
0.2
20.6

0
31.0
B: 2

0
40.5
S: 0

0
66.0
H: 0

ICB Industry : Real Estate


ICB Sector: Real Estate Investment & Services
Principal Business: MKH is an established township developer in
Kajang/Semenyih and Greater Klang Valley. Its 16k ha oil palm
estates in Indonesia has started to contribute significantly

Source of all data: Company, AllianceDBS, Bloomberg

Page 18
www.dbsvickers.com
ed: SGC / sa: WMT

Resilient property sales riding on booming


Kajang/Semenyih growth corridor

Exponential growth from plantation driven by


3-year FFB volume CAGR of 20%

Maintain high-conviction BUY, RM5.85 TP

Record high unbilled sales. MKH is on track to meet its


record high property sales target of RM800m for FY14 (vs
RM580m in FY13). It booked RM410m sales in 1HFY14, of
which RM96m is pre-sale booking. This has yet to include
the strong sales from Saville@Kajang (RM280m GDV)
which has seen 80% take-up despite being launched only
in late April. Thanks to the robust sales, unbilled sales is at
a record high of RM602m as at March, or 1.3x its FY13
property revenue.

Price Relative
4 .1

Strong launch pipeline. MKHs large tract of property


land bank in Kajang/Semenyih (490 acres) makes them the
prime beneficiary of rising land prices at this hotspot.
Upcoming launches for MKH include MKH Avenue
2@Kajang City (RM200m GDV, shop offices),
Saville@Cheras (RM280m, high-rise), and Hill Park Homes
3@Semenyih (RM173m, 2-storey terrace houses). These
should be well-received due to their strategic locations and
affordable pricing.
Plantation a potential catalyst. FFB output hit 130k MT
in 1HFY14 (48% of our full-year forecast), and we
understand April FFB yield was strong. We expect
plantation contribution to rise to 33%/38% of FY14/15
group earnings (from 17% in FY13).
High conviction pick. We project MKH to register 32%
earnings CAGR over FY13-16F. MKHs unrivalled strong
growth prospects in both the Property and Plantation
segments will drive a multi-year re-rating of the stock.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (RMm/US$m)
Major Shareholders
Chen Choy & Sons Realty (%)
Public Bank Grp Off Fund (%)
Free Float (%)
Avg. Daily Vol.(000)

419
1,682 / 528
43.1
9.8
47.1
572

Company Focus
MKH Bhd

Income Statement (RM m)


FY Sep

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

Turnover
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
PrePre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
Net Profit before Except.
EBITDA

688
(441)
247
(90)
158
0
11
(17)
(16)
136
(29)
(3)
0
103
119
183

775
(416)
359
(154)
205
0
3
(23)
0
184
(46)
(3)
0
135
135
208

983
(536)
447
(163)
284
0
3
(26)
0
261
(65)
(5)
0
191
191
287

1,374
(801)
572
(173)
400
0
3
(26)
0
377
(94)
(8)
0
275
275
403

Sales Gth (%)


EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Effective Tax Rate (%)

26.2
59.8
69.7
38.5
21.3

12.5
13.8
30.1
30.9
25.0

26.9
38.1
38.6
40.8
25.0

39.7
40.4
40.8
44.5
25.0

Cash Flow Statement (RM m)


FY Sep
2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

184
0
(9)
(3)
52
0
224
(80)
(50)
0
0
0
(130)
(26)
0
0
0
(26)
0
68

261
0
(46)
(3)
(58)
0
154
(80)
(21)
0
0
0
(101)
(35)
0
0
0
(35)
0
18

377
0
(65)
(3)
(128)
0
181
(80)
(22)
0
0
0
(102)
(35)
0
0
0
(35)
0
44

Balance Sheet (RM m)


FY Sep

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

Net Fixed Assets


Invts in Associates & JVs
Invt & Devt Properties
Other LT Assets
Cash & ST Invts
Dev Props held for sale
Inventory
Debtors
Other Current Assets
Total Assets

163
28
264
713
123
280
41
113
561
1,851

243
31
264
763
191
203
61
134
526
2,016

323
34
264
784
208
262
77
170
637
2,250

403
37
264
806
252
392
108
238
865
2,627

ST Debt
Other Current Liab
LT Debt
Other LT Liabilities
Shareholders Equity
Minority Interests
Total Cap. & Liab.

107
182
40
152
951
3
1,851

107
199
77
152
1,061
6
2,016

107
252
96
152
1,216
11
2,250

107
353
125
152
1,457
19
2,627

Non-Cash Wkg. Capital


Net Cash/(Debt)

339
(399)

250
(331)

289
(313)

388
(270)

Rates & Ratio


FY Sep

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

Gross Margins (%)


Opg Profit Margin (%)
Net Profit Margin (%)
ROAE (%)
ROA (%)
ROCE (%)
Div Payout Ratio (%)
Net Interest Cover (x)
Asset Turnover (x)
Debtors Turn (avg days)
Creditors Turn (avg days)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Net Debt/Equity ex MI (X)
Capex to Debt (%)
Z-Score (X)
N. Cash/(Debt)PS (sen)
Opg CFPS (sen)
Free CFPS (sen)

36.0
22.9
15.0
12.0
6.2
8.4
25.3
9.2
0.4
54.9
137.6
2.1
0.7
0.4
0.4
33.4
0.0
(114.2)
27.6
(15.5)

46.3
26.4
17.5
13.4
7.0
9.1
25.8
8.7
0.4
58.1
167.2
1.9
0.8
0.3
0.3
15.3
0.0
(79.0)
41.1
34.4

45.5
28.9
19.4
16.7
8.9
11.7
18.3
10.9
0.5
56.5
153.5
1.9
0.8
0.3
0.3
15.3
0.0
(74.8)
50.5
17.6

41.7
29.1
20.0
20.6
11.3
14.8
19.0
15.3
0.6
54.2
137.7
1.9
0.8
0.2
0.2
15.3
0.0
(64.3)
73.6
24.0

Quarterly / Interim Income Statement (RM m)


FY Sep
3Q2013
3Q2013 4Q2013
4Q2013 1Q2014
1Q2014 2Q2014
2Q2014

Segmental Breakdown / Key Assumptions


2013A
2014F
FY Sep
2013A
2014F

2015F
2015F

2016F
2016F

Turnover
Cost of Goods Sold
Gross Profit
Other Oper. (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
PrePre-tax Profit
Tax
Minority Interest
Net Profit
Net profit bef Except.
EBITDA

185
(115)
70
(22)
48
0
0
(6)
2
44
(12)
0
32
30
48

218
(142)
76
(16)
60
0
1
(2)
(33)
27
(2)
0
24
57
61

182
(118)
64
(16)
49
0
1
(5)
(20)
25
(6)
(2)
17
37
50

188
(113)
76
(24)
52
0
1
(7)
29
75
(19)
(5)
51
21
53

Sales Gth (%)


EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Gross Margins (%)
Opg Profit Margins (%)
Net Profit Margins (%)

35.1
88.8
91.6
155.0
37.8
26.0
17.4

17.5
27.3
25.4
(25.2)
35.0
27.7
11.1

(16.2)
(18.6)
(19.4)
(30.8)
35.3
26.7
9.2

3.1
6.4
6.3
203.1
40.2
27.5
26.9

Revenues (RM m)
Property development &
Hotel & property investment
Trading
Manufacturing
Plantation
Total
EBIT (RM m)
Property development &
Hotel & property investment
Trading
Manufacturing
Plantation
Total
EBIT Margins (%)
Property development &
Hotel & property investment
Trading
Manufacturing
Plantation
Total
Key Assumptions
CPO ASP (RM/MT)
FFB production (MT)
property sales (RMm)

Pre-Tax Profit
Dep. & Amort.
Tax Paid
Assoc. & JV Inc/(loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Invts in Assoc. & JV
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash

136
14
(36)
(11)
(6)
13
109
(174)
(24)
0
34
0
(164)
(13)
49
52
0
88
(20)
13

476
32
67
9
101
688

489
34
72
9
170
775

610
36
78
10
249
983

964
38
85
10
277
1,374

115
15
4
0
29
163

118
15
5
0
67
205

153
16
5
0
109
284

239
17
6
0
138
400

24.2
46.9
6.7
(2.3)
28.3
23.7

24.1
45.0
7.0
1.0
39.2
26.4

25.1
45.0
7.0
1.5
43.8
28.9

24.7
45.0
7.0
1.8
49.9
29.1

2,525.5 2,545.1 2,617.9


271,681. 340,780. 382,445.
580.8
728.6
896.6 1,058.0

Source: Company, AllianceDBS

Page 19

Company Focus

SP Setia
Refer to important disclosures at the end of this report

Bloomberg: SPSB MK | Reuters: SETI.KL

BUY RM3.52
RM3.52 KLCI : 1,872.97

Poised to recover

(Upgrade from Hold)


Price Target : 12-Month RM 4.10 (Prev RM 2.95)
Potential Catalyst: M&A by largest shareholder PNB
DBSV vs Consensus: More conservative sales assumptions
Analyst
QUAH He Wei, CFA +603 2604 3966
hewei@alliancedbs.com

Price Relative
RM

R e la tiv e In d e x

4 .9

206

4 .4

186
166

3 .9

146
126

3 .4

106
2 .9

86

2 .4
J u l-1 0

J u l-1 1

S P S e t ia (L H S )

J u l-1 2

66
J u l-1 4

J u l-1 3

R e la t iv e K L C I IN D E X (R H S )

Forecasts and Valuation


FY Oct (RM m)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (sen)
EPS Pre Ex. (sen)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (sen)
Net DPS (sen)
BV Per Share (sen)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Earnings Rev (%):
Consensus EPS (sen
sen):
sen :
Other Broker Recs:

2013A
2013A
3,061
554
570
418
431
16.9
17.4
6
9
16.9
10.6
235.1
20.9
20.3
13.0
19.9
3.0
1.5
0.4
8.7

2014F
2014F
4,095
847
725
436
436
17.6
17.6
4
1
17.6
7.9
242.5
20.0
20.0
184.4
14.4
2.2
1.5
0.6
7.8

2015F
2015F
5,658
1,203
986
612
612
24.7
24.7
40
40
24.7
11.1
252.9
14.3
14.3
25.5
10.9
3.2
1.4
0.7
10.5

2016F
2016F
7,732
1,703
1,456
703
703
28.4
28.4
15
15
28.4
12.8
264.9
12.4
12.4
17.6
7.9
3.6
1.3
0.6
11.6

0
19.6
B: 4

0
26.2
S: 4

0
31.6
H: 15

ICB Industry : Real Estate


ICB Sector: Real Estate
Principal Business: Sector leader - largest residential property
developer by market cap and sales

Source of all data: Company, AllianceDBS, Bloomberg

Page 20
www.dbsvickers.com
ed: SGC / sa: WMT

CEO departure priced in; historical low PE and


P/BV valuation (at -1SD of mean)

Large tract of quality and prime land bank to


sustain long-term growth

Record high RM11.2bn unbilled sales to support


earnings visibility

Upgrade to Buy with RM4.10 TP

Robust outlook. Despite relatively weaker sentiment in


the property sector, we project SPSB will deliver strong 3year earnings CAGR of 18%, underpinned by record high
unbilled sales of RM11.2bn (4x FY13 property
development revenue). 7MFY14 property sales stood at
RM3.2bn, suggesting it is on track to meet FY14 target of
RM5bn. The strong 95% take-up for Battersea Phase 2
(GBP800m GDV; 2.3k psf ASP) launched in May will help
to grow unbilled sales in 2HFY14. We expect exponential
growth in FY16/17 following the handover of Battersea
Phase 1.
Strategic land bank. Given SPSBs prime 4,782-acre land
bank (RM71bn GDV) at low holding cost, SPSB stands to
benefit the most from the steep land price appreciation in
recent years. It is poised to benefit from resilient demand
for its established township developments in Setia Alam
(712 acres undeveloped; RM3.50psf land cost) and Setia
Eco Hill (1,447 acres; RM10.2psf) which should continue to
see strong sales.
Upgrade to BUY, RM4.10 TP. Our TP is based on smaller
30% discount (50% previously) to our RNAV of RM5.86.
The CEO departure has been priced in as PE and P/BV
multiples are at historical lows at -1SD of mean. Strong
fundamentals should limit downside to the share price,
which is also supported by 3.2% FY15 dividend yield,
based 60% historical payout. Re-rating catalyst could
come from potential M&A exercise which is likely to be
done above put option exercise price granted to Tan Sri
Liew Kee Sin at RM3.95/share.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (RMm/US$m)
Major Shareholders
Permodalan Nasional (%)
Skim Amanah Saham (%)
KWAP (%)
Free Float (%)
Avg. Daily Vol.(000)

2,522
8,876 / 2,788
53.1
15.5
7.2
19.3
1,154

Company Focus
SP Setia

Income Statement (RM m)

Balance Sheet (RM m)

FY Oct

Turnover
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
PrePre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
Net Profit before Except.
EBITDA

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

3,061
(2,506)
554
(13)
541
0
0
(8)
(13)
570
(151)
(1)
0
418
431
554

4,095
(3,248)
847
(66)
781
0
(30)
(25)
0
725
(181)
(81)
0
436
463
847

5,658
(4,455)
1,203
(154)
1,049
0
(24)
(39)
0
986
(246)
(94)
0
612
645
1,203

7,732
(6,028)
1,703
(184)
1,519
0
(19)
(43)
0
1,456
(364)
(349)
0
703
743
1,703

21.1
4.4
4.6
6.1
26.5

33.8
52.9
44.3
4.3
25.0

38.2
42.0
34.4
40.3
25.0

36.7
41.6
44.7
15.0
25.0

2013
2013A
13A

2014F
2014F

2015F
2015F

2016F
2016F

570
13
(244)
0
455
(125)
670
(235)
(1,434)
(94)
17
34
(1,713)
(254)
642
1,329
26
1,743
0
700

725
66
(151)
30
(582)
(42)
47
(839)
0
0
0
0
(839)
(261)
802
0
(81)
459
0
(332)

986
154
(181)
24
(602)
(38)
342
(723)
0
0
0
0
(723)
(367)
721
0
0
354
0
(26)

1,456
184
(246)
19
(876)
(42)
495
(82)
0
0
0
0
(82)
(422)
417
0
0
(5)
0
408

Sales Gth (%)


EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Effective Tax Rate (%)

Cash Flow Statement (RM m)


FY Oct

Pre-Tax Profit
Dep. & Amort.
Tax Paid
Assoc. & JV Inc/(loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Invts in Assoc. & JV
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

Net Fixed Assets


Invts in Associates & JVs
Invt & Devt Properties
Other LT Assets
Cash & ST Invts
Dev Props held for sale
Inventory
Debtors
Other Current Assets
Total Assets

122
58
5,932
220
2,243
2,693
43
1,058
73
12,442

894
28
5,833
220
1,911
1,922
36
1,204
654
12,703

1,463
4
5,737
220
1,885
2,163
45
1,529
1,108
14,153

1,361
(16)
5,642
220
2,293
2,992
60
2,090
1,242
15,885

ST Debt
Other Current Liab
LT Debt
Other LT Liabilities
Shareholders Equity
Minority Interests
Total Cap. & Liab.

614
2,343
40
5
5,526
(1)
12,442

614
1,547
40
5
5,700
80
12,703

614
1,937
40
5
5,944
175
14,153

614
2,621
40
5
6,226
524
15,885

Non-Cash Wkg. Capital


Net Cash/(Debt)

1,485
(2,286)

2,230
(3,420)

2,868
(4,168)

3,723
(4,176)

FY Oct

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

Gross Margins (%)


Opg Profit Margin (%)
Net Profit Margin (%)
ROAE (%)
ROA (%)
ROCE (%)
Div Payout Ratio (%)
Net Interest Cover (x)
Asset Turnover (x)
Debtors Turn (avg days)
Creditors Turn (avg days)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Net Debt/Equity ex MI (X)
Capex to Debt (%)
Z-Score (X)
N. Cash/(Debt)PS (sen)
Opg CFPS (sen)
Free CFPS (sen)

18.1
17.7
13.7
8.7
3.8
4.4
59.6
67.4
0.3
107.5
272.1
2.0
1.1
0.4
0.4
5.2
1.5
(97.3)
8.6
17.5

20.7
19.1
10.6
7.8
3.5
5.5
42.7
30.8
0.3
100.8
223.1
2.6
1.4
0.6
0.6
15.7
1.7
(145.5)
25.4
(31.9)

21.3
18.5
10.8
10.5
4.6
6.8
42.7
26.7
0.4
88.2
147.8
2.6
1.3
0.7
0.7
11.9
1.8
(177.3)
38.1
(15.4)

22.0
19.6
9.1
11.6
4.7
9.0
42.7
35.2
0.5
85.4
142.3
2.6
1.3
0.6
0.7
1.3
1.9
(177.7)
55.3
16.7

Rates & Ratio

Quarterly / Interim Income Statement (RM m)


FY Oct

FY Oct

Segmental Breakdown / Key Assumptions

3Q2013
3Q2013

4Q2013
4Q2013

1Q2014
1Q2014

2Q2014
2Q2014

Turnover
Cost of Goods Sold
Gross Profit
Other Oper. (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
PrePre-tax Profit
Tax
Minority Interest
Net Profit
Net profit bef Except.
EBITDA

762
(590)
172
(4)
168
0
0
(12)
(12)
144
(40)
(2)
102
113
172

900
(685)
215
(4)
211
0
0
(19)
(12)
180
(52)
0
127
139
215

722
(546)
175
(6)
170
0
(9)
(14)
0
147
(30)
(20)
97
97
167

952
(748)
204
(7)
197
0
(15)
(16)
0
165
(47)
(44)
74
74
189

Sales Gth (%)


EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Gross Margins (%)
Opg Profit Margins (%)
Net Profit Margins (%)

7.1
16.7
17.1
6.4
22.5
22.1
13.4

18.2
25.0
25.7
24.9
23.9
23.4
14.1

(19.8)
(22.4)
(19.6)
(24.0)
24.3
23.5
13.4

32.0
13.4
15.8
(23.3)
21.4
20.7
7.8

FY Oct

Revenues (RM m)
Construction
Property Development
Property & Investment
Total
Pretax profit (RM m)
Construction
Property Development
Property & Investment
Total
Pretax Margins (%)
Construction
Property Development
Property & Investment
Total
Key Assumptions
Property sales

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

122
2,810
129
3,061

122
3,844
129
4,095

122
5,407
129
5,658

122
7,481
129
7,732

5
533
32
0
570

5
714
32
(25)
725

5
988
32
(39)
986

5
1,463
32
(43)
1,456

4.1
19.0
24.7
18.6

4.1
18.6
24.7
17.7

4.1
18.3
24.7
17.4

4.1
19.6
24.7
18.8

10,501.3

5,477.2

4,521.2

4,275.1

Source: Company, AllianceDBS

Page 21

Malaysia Company Focus

Eco World Development Bhd


Refer to important disclosures at the end of this report

Bloomberg: ECW MK | Reuters: ECOW.KL

DBS Group Research . Equity

21 Jul 2014

BUY RM5.08
RM5.08 KLCI : 1,872.97

New kid with old hands

(Initiating Coverage)
Price Target : 12-Month RM 6.00
Reason for Report : Initiation
Potential Catalyst: Strong property sales, aggressive property
launches, earnings delivery
Analyst
QUAH He Wei, CFA +603 2604 3966
hewei@alliancedbs.com

R e la tiv e In d e x

2076

5 .1
4 .1

1576

3 .1
1076
2 .1
576

1 .1
0 .1
J u l-1 0

J u l-1 1

J u l-1 2

E c o W o r ld D e v e lo p m e n t B h d (L H S )

J u l-1 3

76
J u l-1 4

R e la t iv e K L C I IN D E X (R H S )

Forecasts and Valuation


FY Oct (RM m)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (sen)
EPS Pre Ex. (sen)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (sen)
Net DPS (sen)
BV Per Share (sen)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Consensus EPS (sen
sen):
sen :
Other Broker Recs:

2013A
2013A
156
34
30
24
24
9.6
9.6
237
237
9.6
0.0
125.8
53.0
53.0
42.5
39.0
0.0
4.0
0.1
7.9

2014F
2014F
84
13
10
8
8
1.2
1.2
(87)
(87)
1.2
0.0
378.6
423.9
423.9
122.1
380.7
0.0
1.3
0.7
0.6

2015F
2015F
942
241
103
77
77
11.8
11.8
882
882
11.8
0.0
390.3
43.2
43.2
nm
22.7
0.0
1.3
0.8
3.1

2016F
2016F
2,318
446
267
200
200
30.4
30.4
159
159
30.4
0.0
420.8
16.7
16.7
nm
12.8
0.0
1.2
0.8
7.5

4.7
B: 4

5.5
S: 1

10.8
H: 0

ICB Industry : Financials


ICB Sector: Real Estate Investment & Services
Principal Business: Township developer with 4,400 acres of land
bank offering comprehensive range of products

*13-month period for FY14 due to FYE change to Oct from Sep

Source of all data: Company, AllianceDBS, Bloomberg Finance L.P

www.dbsvickers.com
ed: TH / sa: WMT

New lease of life with RM43bn GDV pipeline


projects under reinvigorated corporate identity,
back by a highly experienced management team

RM5bn sales target for the next two years to


spearhead complete transformation

Initiate with BUY and RM6.00 TP

DNA of a property bellwether.


bellwether. ECW (formerly known as
Focal Aims), a relatively new property developer, is helmed by
former top executives of SP Setia. Since the takeover by Eco
World Development Holdings Sdn Bhd (20% stake; EWH) and
Liew Tian Xiong (35% stake; eldest son of Tan Sri Liew Kee
Sin founder of SP Setia) in Nov13, ECW has proposed to
acquire development rights of eight subsidiaries from Eco
World Development Sdn Bhd (EWSB; 50% owned by EWH)
that will position the Group as the fastest-rising property
developer in Malaysia.

Price Relative
RM

4,4004,400-acre land bank worth RM43.5bn GDV will offer ECW


immediate presence in Klang Valley, Iskandar Malaysia and
Penang Malaysias top property hotspots. The Group targets
to achieve RM5bn sales over two years, given the new
projects to be launched over FY14-15F.
ValueValue-accretive land acquisition in the pipeline.
pipeline. Thanks to its
managements track record, ECW is participating in the
redevelopment of the former Pudu Jail site at a 20-acre prime
Bukit Bintang land which could carry RM7bn GDV. The board
is still deliberating on the offer to acquire a 1.18-acre land in
Parramatta, Australia, and it could secure the 470-acre land in
Batu Kawan which we understand it is the frontrunner in the
request for proposal from the Penang state government.
Initiate with BUY.
BUY. We arrive at our TP of RM6.00, based on a
20% discount to our RNAV methodology (pre-share split). On
ex-all basis, we value ECW at RM2.00 (excluding 7-yr warrant
dilution). We expect ECWs earnings to grow substantially to
RM77m in FY15 from RM24m in FY13, thanks to the
unprecedented property sales boosted by the management
teams undisputed brand name.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (RMm/US$m)
Major Shareholders
Liew Tian Xiong (%)
Eco World Development Holdings (%)
Free Float (%)
Avg. Daily Vol.(000)

253
1,287 / 404
35.1
20.0
24.5
967

Company Focus

Eco World Development Bhd

SWOT Analysis
Strengths
Impressive execution track record underpinned by former SP
Setia management team which had grown SP Setia into the
Malaysian property bellwether from a relatively small
establishment.

Strong market confidence.


confidence Despite being a relatively new
property developer, ECW has been able to sell properties at
an unprecedented pace, reflecting property buyers
confidence in the management teams strong brand name.

Weakness
Building up from scratch.
scratch Historically, ECW has not had
successful large-scale projects to boast of.

Relatively more expensive land cost.


cost ECW is acquiring vast
land banks at relatively higher prices due to the steep
appreciation over the past few years.
Premium pricing.
pricing ECWs higher selling price relative to
some of its peers may not be sustainable if the economic
outlook deteriorates.

Huge land bank.


bank ECW is now in the midst of a corporate
exercise that will leapfrog its land bank from 1,300 to 4,400
acres upon completion of the deal.
Innovative product offerings.
offerings ECW is likely to offer
innovative products via well-crafted township planning,
given its large parcel of land bank

Opportunities
Favourable demographics.
demographics Young and growing population
and workforce will continue to support property demand,
especially in Greater KL which is also the employment hub.

Urban migration.
migration Malaysian governments aspiration to
grow the Greater KL population to 10m by 2020 from an
estimated 7m currently will serve as a major demand driver
MRT connectivity will help support demand, especially in the
suburban areas given the availability of vast land bank

Threats
Relatively weaker property sentiment. The strong property
price surge over the last few years, coupled with recent
tightening measures, could weaken property sales as
property buyers are becoming more cautious.

Tighter bank lending.


lending Stricter lending guidelines by banks
due to rising housing debt may lead to softer sales.
Rising cost.
cost Construction and building material costs have
been on the uptrend which may erode developers
profitability.

Source: AllianceDBS

Page 23

Company Focus

Eco World Development Bhd

Company Background
Proposed acquisitions and corporate structure
New lease of life.
life. EWH and Liew Tian Xiong took over ECW
(previously known as Focal Aims) with a 65% stake in Nov13
Liew Tian
20%
Xiong
Sinarmas
EWH
after months of speculation that ECW would be Tan Sri Liew
Kee Sins listed vehicle after his exit from SP Setia. With the
50%
50%
35%
Present
recent proposed acquisition and fund raising exercise
(expected completion by Oct14), ECW will be propelled to
the forefront of the Malaysian property sector, given its
ECW
EWSB
massive 4,400-acre land bank with RM43.4bn GDV potential.
Massive corporate exercise to transform ECW.
ECW The proposed
corporate exercise announced in Apr14 entails:
a)
b)

c)

Proposed acquisition of development rights to eight


projects from EWSB
Proposed subscription of shares in ECW by shareholders
of EWSB to partially fund the acquisitions and ensure
continuity of ownership
Proposed rights issue with warrants and up to 20%
proposed private placement

- Proposed acquisition of
development rights of 8
subsidiaries
- Proposed acquisition of
Eco Macalister and Eco
World project
management

- 8 subsidiaries
- Eco Macalister
- Eco World project
management

Source: AllianceDBS, Company

Proposed fund raising


s h a re s
Pro c e e d s R e ma rks
(m)
(R M m)
253.3

share base

It also includes the acquisition of two EWSB subsidiaries, Eco


World Project Management Sdn Bhd (project management
team) and Eco Macalister Development Sdn Bhd (investment
property asset in Penang).

share split

506.6

share subscription

806.8

Currently, ECW has only one ongoing project in Kota Masai,


with 991.6 acres left for development. The proposed
corporate exercise will offer immediate presence in the key
property hotspots in Malaysia Klang Valley, Iskandar
Malaysia and Penang. This will offer ECW the much needed
platform to drive exponential growth prospects, leveraging
on its execution capability and track record.

rights issue with


warrants

1,371.6 @ RM1.70/share by
Sinarmas and EWH

1,313.5
656.7

788.0 Illustrative@RM1.20;
entitlement not fixed

1,970.2
20% placement

394.0

634.4 Illustrative@RM1.61;
Price not fixed

2,364.3
warrants

525.4

1,035.0

2,889.7

Source: AllianceDBS, Company

Sales Trend

Profitability Trend
RM m

RM m

407

2,000
1,500

950.0%

357

750.0%

307
257

550.0%
1,000
500

207

350.0%

157

150.0%

107
57

-50.0%
2012A

2013A

Total Revenue

Source: Company, AllianceDBS

Page 24

2014F

2015F

2016F

Revenue G row th (% ) (YoY)

7
2012A

2013A

O perating EBIT

2014F
Pre tax Profit

2015F

2016F
N et Profit

Company Focus

Eco World Development Bhd

Chronology of EWSBs rise prior to the proposed corporate exercise

Source: Company

Raring to go.
go. EWSBs 3,107 acres of land bank (RM30bn GDV
potential) will also come in handy for ECW to grow its
earnings as several projects, such as the RM11bn Eco
Majestic@Semenyih and RM5.9bn Eco Spring@Tebrau, were
introduced to the public in May14. The land bank would also
help address the skyrocketing land prices which have made it
challenging for developers to acquire sizeable land banks.
With the ready launch pipeline, ECW will be able to just focus
on delivering the products and values to its stakeholders.
Growing on a solid footing.
footing EWSB was incorporated in
Dec11 and it has been on an aggressive land bank acquisition
trail to accumulate 3,106.8 acres of land within Klang Valley,
Penang and Iskandar Malaysia. ECWs access to the land
banks will set the stage for explosive growth over the next
few years. Though ECW is still a relatively new property
developer in Malaysia, the execution ability of its key
management team has never been in doubt. The strong
response to its EcoSky and EcoBotanic projects launched late
last year has been more than impressive, judging by the
lengthy queues and buying frenzies witnessed at the project
launches, which is unprecedented by any standard for a new
developer.

Ready launch pipeline with the land bank acquisitions


En l a rg e d la n d b a n k Ac re s
GDV (R M m)
Ec o Ce n tra l Saujana Glenmarie
25.9
90
Eco Sky
9.6
974
Eco Majestic
1073.1
11,144
Eco Sanctuary
308.7
8,000
1 4 1 7 .3
2 0 ,2 0 8
Ec o So u th Eco Botanic
325.1
3,794
Eco Spring
613.8
5,871
Eco Tropics
743.6
3,400
Eco Business Park 1
612
3,799
Eco Business Park 2
383.6
3,009
Eco Business Park 3
248
2,000
2 ,9 2 6
2 1 ,8 7 3
Ec o No rth Eco Terraces
12.8
338
Eco Meadows
75.7
916
Eco Macalister
1.1
190
8 9 .6
1 ,4 4 4
4 ,4 3 3

4 3 ,5 2 5

Source: AllianceDBS, Company

Page 25

Company Focus

Eco World Development Bhd

Property projects in the pipeline

Exi s ti n g l a n d

Lo c a ti o n

Eco Sanctuary
Saujana Glenmarie
Eco Tropics
Eco Business Park 3

typ e

Kota Kemuning
Glenmarie, Shah Alam
Pasir Gudang, Johor
Pasir Gudang, Johor

Te n u re

Mixed dev.
residential township
Mixed dev.
business park

LH
FH
FH
FH

siz e
(a c re )
308.7
25.9
743.6
248

ma rke t R Mp s f
GDV
va l u a ti o n
(R Mm)
(R M m)
8,000
90
3,400
2,000

1326

1 3 ,4 9 0

12.8
75.7
1.1
9.6
1073.1
325.1
613.8
612
383.6
3107

338
916
190
974
11,144
3,794
5,871
3,799
3,009
3 0 ,0 3 5

To a c q u i re
Eco Terraces
Eco Meadows
Eco Macalister
Eco Sky
Eco Majestic
Eco Botanic
Eco Spring
Eco Business Park 1
Eco Business Park 2

Paya Terubong, Penang


Batu Kawan, Penang
George Town, Penang
Taman Wahyu, KL
Semenyih, Selangor
Nusajaya, Johor
Tebrau, Johor
Tebrau, Johor
Senai, Johor

niche dev.
integrated commercial
Serviced apartments
integrated commercial
mixed dev
mixed dev
mixed dev
business park
business park

FH
FH
FH
FH
FH
FH
FH
FH
FH

Source: AllianceDBS, Company


Geographical breakdown of land bank

Eco North,
3%

Eco North
2%

Eco
Central
32%
Eco South
66%

Source: AllianceDBS, Company

Page 26

Geographical breakdown of GDV

Eco South,
50%

Source: AllianceDBS, Company

Eco
Central,
46%

61
109.4
116
35.2
48 1,001.8
118
282.2
950
20.3
726
51.3
670
25.1
598
22.4
546
32.7
3 ,8 3 3

Company Focus

Eco World Development Bhd

Location of Eco Central in Klang Valley

Source: Company

Location of Eco North in Penang

Source: Company

Page 27

Company Focus

Eco World Development Bhd

Location of Eco South in Iskandar Malaysia, Johor

Source: Company

Page 28

Company Focus

Eco World Development Bhd

Management
Highly experienced team.
team ECW is helmed by Dato Chang
Khim Wah Group President and CEO. Dato Chang has 26
years of experience in the property development industry and
he was the Executive Vice President in charge of Southern
and Northern Property divisions of SP Setia where he served
for c.20 years. Also, Mr. Heah Kok Boon, Executive Director
and CFO, was the Head of Corporate Affairs in SP Setia and
has more than 24 years of experience in audit, corporate
finance and corporate investments.

Credible shareholders.
shareholders The board of directors comprises the
likes of Tan Sri Abdul Rashid bin Abdul Manaf and Dato
Leong Kok Wah who were also formerly non-executive
directors in SP Setia. Meanwhile, Mr. Liew Tian Xiong,
Executive Director, is likely to have honed his skills under the
guidance of his father, Tan Sri Liew Kee Sin, who himself has
achieved tremendous success as the founder of SP Setia. Tan
Sri Liew has also been appointed as a non-independent and
non-executive director of ECW recently.

Board of Directors
Name
Tan Sri Abdul Rashid
bin Abdul Manaf

Position
Non-Independent
Non-Executive
Chairman

Background
- Barrister at Law (Middle Temple London)
- Former President of Session Courts in Klang
- Former Senior Federal Counsel for Income Tax Department

Dato' Leong Kok Wah

Non-Independent
Non-Executive
Deputy Chairman

- MBA from University of Hull, UK


- Extensive experience in construction as well as stockbroking industry
- Executive Director of Salcon Berhad

Dato' Chang Khim


Wah

President and CEO

- Bachelor of Engineering, University of New South Wales


- 26 years of experience in property development
- Former director of SP Setia, EVP in charge of Southern and Northern property divisions

Heah Kok Boon

Executive Director

- Bachelor in Commerce (Accounting and Commercial Law), University of Melbourne


- 24 years of experience in audit, corporate finance and corporate investment
- Former head of corporate affairs in SP Setia

Liew Tian Xiong

Executive Director

- Bachelor's degree in Commerce, University of Melbourne


- Working experience from attachments with Pheim Asset Management and AmBank

Tan Sri Liew Kee Sin

Non-Independent
Non-Executive
Director

- Bachelor of Economics Degree, University of Malaya

Tan Sri Lee Lam Thye

Independent NonExecutive Director

- Former Assemblyman and Member of Parliament


- Chairman of National Institute of Occupational Safety and Health

Tang Kin Kheong

Independent NonExecutive Director

- Certified Public Accountant, Malaysia


- 23 years of experience as a practicing accountant

Dato' Idrose bin


Mohamed

Independent NonExecutive Director

- Bachelor Degree in Civil Engineering, UiTM


- 30 years of experience in construction, project and infrastructure implementation

- Former President and CEO of SP Setia


- Property Man of the Year by FIABCI Malaysia in 2007

Page 29

Company Focus

Eco World Development Bhd

Replicating a highly successful SP Setia?


Another SP Setia in the making?
making? Given that most of the
management and employees come from SP Setia, there is
little doubt in terms of the execution track record of ECW.
The more pertinent concern would be the extent of ECW in
emulating the success in SP Setia as we believe that the SP
Setia DNA within the senior management team would lend
credence to what lies ahead for this new developer which has
been dominating the news headlines of late.

Undisputed property bellwether.


bellwether The ECWs existing
management team was instrumental in growing SP Setia to
where it is today. SP Setias market cap was less than RM2bn
back in 2006 and today the company is worth more than
RM8bn, implying substantial returns to its shareholders. This
is largely attributable to the entrepreneurial drive of the
management which had been relentlessly expanding the
companys property development activities.

SP Setias record-breaking property sales

SP Setias rising market cap


9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

Jan-03

Jan-02

Jan-01

Source: AllianceDBS, SP Setia

RMm
10,000

Jan-00

(RMb)
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Source: AllianceDBS, Bloomberg Finance L.P.

SP Setias revenue growing rapidly


RMm
3,500

%
30
25

3,000

20
2,500

15

2,000

10

1,500

5
0

1,000

(5)
500

(10)

Revenue

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

(15)

2000

0
revenue growth

Source: AllianceDBS, Company

Visionary leadership.
leadership Under the stewardship of Tan Sri Liew
Kee Sin, SP Setia has been charting new highs year after year
when it comes to financial as well as operational
performance. SP Setia was the first property developer to
introduce the innovative 5/95 scheme during the financial
crisis where property buyers only had to fork out 5% of the
purchase price upon signing the sales & purchase agreement.
It turned out that other developers also followed suit on the
scheme which has proven to be critical to avert the severe
downturn back then.

Page 30

Relentless expansion drive


drive. SP Setia has established a solid
brand name within Malaysian households, thanks to its
outstanding delivery throughout the years. Value-adding
projects with lifestyle-enhancing features for their township
developments have been sought after by buyers in
anticipation of future appreciation. Tan Sri Liew and his key
executives had also brought SP Setia to expand beyond
Malaysia, penetrating into Melbourne, London, Vietnam and
Singapore. The tremendous success of the company led to
numerous The Edge Malaysia and FIABCI awards.
Poised for success
success. Therefore, ECW stands to leverage on the
vast experience of its management team to add value to the
4,400 acres of land bank that it will own upon completion of
the proposed corporate exercise.

Company Focus

Eco World Development Bhd

Competitive Strengths

Growth Strategies

Strong brand name.


name While the Eco World brand name was
only introduced to the market last year, the management and
key shareholders behind ECW have long been widely
acclaimed for their strong delivery and execution track record.
The sell-outs of EWSBs first launch at Eco Botanic@Nusajaya
and Eco Sky@Taman Wahyu (both to be injected into ECW)
underline the overwhelming confidence bestowed by the
public. As at Mar14, EWH had already achieved RM1.1bn
sales from the two projects. We expect subsequent phases of
the projects to continue garnering keen interest from
property buyers.

Rein in rising land prices.


prices Upon completion of the corporate
exercise, ECW will have a ready launch pipeline for its
property projects, thanks to the massive land bank which is
strategically situated within Malaysias property hotspots of
Klang Valley, Penang and Iskandar Malaysia. Development
land typically account for 10-20% of a project GDV while
construction costs (labour, building materials, etc) will
account for 50-60%. Given the scale of ECW projects, we
believe its initial cost will be higher, as the Group strives to
add value by providing world-class eco living through
innovative designs.

ECW showcased its EcoMajestic@Semenyih, Eco


Spring@Tebrau, EcoTropics@Pasir Gudang and Eco Business
Park 1 in May14, collectively accounting for RM20.8bn GDV.
The first phase of EcoMajestic@Semenyih attracted
overwhelming response from buyers where 95% of the 612
units of terraced homes with varying sizes priced from
RM586k onwards were sold over a weekend. Meanwhile,
both EcoSpring and EcoTropics managed to achieve 85%
take-up for the total 197 cluster (>RM1m/unit) and semidetached units (>RM1.5m/unit), as well as 497 terraced
homes (>RM650k/unit).

Right products
products at right locations.
locations Most of ECWs projects will
be gated and guarded landed properties which are expected
receive stronger demand than high-rise projects, particularly
in Iskandar Malaysia where there will be massive supply of
condos flooding the market when the launched projects over
the past few years are completed in the near term.

Comprehensive
Comprehensive product range.
range ECW will boast a wide range
of products including affordable, upgrader and luxury homes,
as well as integrated high-rise developments and green
business parks, catering to all walks of life. ECW has targeted
RM5bn sales within two years as the proposed corporate
exercise will increase its project pipeline to 11 projects from
just three at the moment.
Top developer in the making.
making Upon completion of the
corporate exercise, ECWs land bank will consist of 1,417
acres in Klang Valley, 2,926 acres in Iskandar Malaysia and 90
acres in Penang. The land bank will be enough to sustain
ECWs growth over the next 10 years.
Execution team in place.
place ECW will also have the project
management team that is overseeing and executing EWSBs
property projects. There will also be a heritage building at its
Eco Macalister site which will be refurbished into a sales and
marketing office to showcase ECWs portfolio of investmentgrade properties.

Aggressive launch pipeline.


pipeline Despite the ambitious sales target
amid weaker sentiments after the cooling measures
announced by the government in Oct13, ECWs
managements previous track record suggests that achieving
the feat may not be far-fetched. The overwhelming response
for some of the launches in recent months further reinforces
our view that ECWs unrivalled brand name is likely to attract
buyers at an unprecedented pace.
Explosive earnings trajectory.
trajectory We expect ECWs earnings to
grow exponentially to RM77m in FY15 from RM24m in FY13,
implying an impressive 2-year earnings CAGR of 78%.
Strengthening
Strengthening balance sheet.
sheet As part of the proposed
development rights acquisition, ECW will also undertake a
share subscription by EWSB to partly finance its proposed
acquisition of development rights, as well as a proposed
rights issue with warrants to raise RM788m gross proceeds.
The larger balance sheet will enable ECW to pursue its land
banking activity and scale up its business operations to
support its expansion plans.

Page 31

Company Focus

Eco World Development Bhd

More catalyst in the pipeline

Key Risks

Track record speaks for itself.


itself ECW has been roped in to
participate in the former Pudu Jail redevelopment project,
known as Bukit Bintang City Centre (BBCC) via a 40% equity
stake in the consortium with EPF (20%) and UDA Holdings
Bhd (40%; landowner). It has been reported that the
execution track record of the management team has been
the winning factor for the partnership.

Relatively weaker property sentiment.


sentiment The strong property
price surge over the last few years, coupled with recent
tightening measures, could hamper property sales as property
buyers are getting more cautious with their property
purchase decisions.

BBCC will be developed on the 20-acre prime land in Bukit


Bintang with a potential GDV of RM7bn. The mixed
development will comprise three residential towers housing
2,000 units, a 40-storey block, a 1m-sf shopping mall, a
Malaysian grand bazaar, mosque, al fresco dining terraces
and a food court to complete this 5m NLA project.
At this juncture, ECW is still working closely in consultation
with UDA Holdings to come up with a conceptual master
plan. Assuming the project is developed over a 10-year period
with a pretax margin of 20%, we estimate that BBCC will
enhance our ex-all RNAV by 8 sen (3%).
Venture into Australia.
Australia ECW has also received an offer from
EWSB to sell 1.18 acres of land in Church Street, Parramatta,
NSW 2150, Australia at the same price and on the same
terms as that secured by EWSB from the vendor. The
purchase price of AUD28m implies a land cost of AUD545psf.
The land is located on the southern fringe of the Parramatta
CBD retail precinct, close to the Westfield Shopping Precinct,
railway station and bus interchange. ECWs board has yet to
make a decision on the offer, and an EGM will be convened
should the board accept the offer.
Batu Kawan land.
land Pursuant to the request of proposal (RFP)
by the Penang Development Corporation in Aug13 for the
development of an international theme park and an 18-hole
golf resort development at Bandar Cassia in Batu Kawan,
ECW has participated in the RFP for golf course development,
where the winning bidder will have to develop a golf course
on 60 ha of the total 190 ha land. While there is no official
confirmation on the status of the successful bidders, we
understand that ECW is the only company that has expressed
interest to bid where the opening bid started at RM45psf.
These potential land bank acquisitions clearly illustrate the
managements unbridled desire to grow ECW into one of the
top property developers in Malaysia. As it is, ECW already has
ready launch pipeline which could keep the company busy
over the next decade, by virtue of its massive 4,400-acre land
bank.

Page 32

Tighter bank lending.


lending Stricter lending guidelines by banks due
to rising housing debt may lead to softer sales as certain
property buyers have been facing difficulty in obtaining
mortgage loans.
Rising costs
costs. In tandem with rising property prices,
construction and building material costs have been on the
uptrend and may erode developers profitability.

Company Focus

Eco World Development Bhd

Sensitivity Analysis

Key Assumptions
FY Oct

2011A
2011A

2012A
2012A

2013A
2013A

Property sales (RMm)

2014F
2014F

2015F
2015F

2016F
2016F

1,769.8

1,945.1

3,092.5

Sales +/- 1%

Margins Trend

Income Statement (RM m)


FY Oct

2015
2015

Net Profit +/0.5%

2011A
2011A

2012A
2012A

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

56

65

156

84

942

2,318

(44)

(43)

(108)

(59)

(559)

(1,524)

12

22

48

26

383

793

17.0%

(11)

(11)

(15)

(13)

(141)

(348)

13.0%

Operating Profit

11

34

13

241

446

Other Non Opg (Exp)/Inc

Associates & JV Inc

(2)

(3)

(4)

(3)

(138)

(179)

27.0%
25.0%

Revenue
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc

Net Interest (Exp)/Inc


Exceptional Gain/(Loss)

(2)

30

10

103

267

Tax

PrePre-tax Profit

(1)

(5)

(2)

(26)

(67)

Minority Interest

Preference Dividend

Net Profit

(2)

24

77

200

Net Profit before Except.

(2)

24

77

200

11

34

13

241

446

Revenue Gth (%)

nm

17.2

139.4

(46.0)

1,015.6

146.2

EBITDA Gth (%)

nm 13,233.3

201.3

(61.2)

1,743.0

84.5

Opg Profit Gth (%)

nm 12,881.0

207.2

(60.9)

1,743.0

84.5

Net Profit Gth (%)

nm

nm

237.0

(67.6)

882.3

158.6

EBITDA

23.0%
21.0%
19.0%
15.0%
11.0%
9.0%
7.0%
2012A

2013A

Operating Margin %

2014F

2015F

2016F

Net Income Margin %

Underpinned by strong
unbilled sales of
RM1.1bn as at Mar14

Growth

Margins & Ratio


Gross Margins (%)

20.6

33.7

30.9

30.5

40.6

34.2

Opg Profit Margin (%)

0.2

16.7

21.4

15.5

25.6

19.2

Net Profit Margin (%)

(3.7)

11.0

15.5

9.3

8.2

8.6

ROAE (%)

(1.4)

2.5

7.9

0.6

3.1

7.5

ROA (%)

(0.9)

1.5

5.0

0.3

1.5

3.2

ROCE (%)

0.0

2.2

6.2

0.4

3.7

6.3

Div Payout Ratio (%)

N/A
0.0

0.0

0.0

0.0

0.0

0.0

3.9

8.6

3.7

1.7

2.5

Net Interest Cover (x)

Source: Company, AllianceDBS

Page 33

Company Focus

Eco World Development Bhd

Asset Breakdown

Balance Sheet (RM m)


2011A
2011A

2012A
2012A

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

Net Fixed Assets

101

201

Invts in Associates & JVs

319

303

302

4,110

4,230

4,146

25

413

412

208

Inventory

29

29

40

21

157

386

Debtors

14

45

40

21

238

586

Other Current Assets

81

106

82

79

553

1,094

447

491

489

4,646

5,692

6,621

ST Debt

26

30

47

2,057

2,057

2,057

Creditor

17

54

40

22

471

1,159

26

67

LT Debt

38

34

500

500

Other LT Liabilities

74

74

72

72

72

72

Shareholders Equity

FY Oct
Oct

Other LT Assets
Cash & ST Invts

Total Assets

Other Current Liab

289

296

319

2,486

2,564

2,763

Minority Interests

Total Cap. & Liab.

447

491

489

4,646

5,692

6,621

Non-Cash Wkg. Capital

107

126

118

98

451

840

Net Cash/(Debt)

(61)

(57)

(27)

(1,648)

(2,145)

(2,349)

Debtors Turn (avg days)

46.3

165.5

98.7

131.5

50.3

64.9

Creditors Turn (avg days)

69.7

299.9

158.7

191.4

160.8

195.1

Inventory Turn (avg days)

118.0

245.4

116.5

189.6

58.2

65.0

Asset Turnover (x)

0.2

0.1

0.3

0.0

0.2

0.4

Current Ratio (x)

3.0

2.2

2.0

0.3

0.5

0.7

Quick Ratio (x)

0.4

0.6

0.7

0.2

0.3

0.2

Net Debt/Equity (X)

0.2

0.2

0.1

0.7

0.8

0.8

Net Debt/Equity ex MI (X)

0.2

0.2

0.1

0.7

0.8

0.9

Capex to Debt (%)

0.5

0.1

0.1

0.0

3.9

3.9

Source: Company, AllianceDBS

Page 34

Net Fixed
Debtors - Assets 0.3%
4.7%
Assocs'/JVs 0.0%

Inventory 4.7%
Bank, Cash
and Liquid
Assets 90.4%

Debt assumed from


proposed corporate
exercise

Company Focus

Eco World Development Bhd

Capital Expenditure

Cash Flow Statement (RM m)


2011A
2011A

2012A
2012A

2013A
2013A

2014F
2014F

2015F
2015F

2016F
2016F

Pre-Tax Profit

(2)

30

10

103

267

120

Dep. & Amort.

100

Tax Paid

(4)

(2)

(26)

80

Assoc. & JV Inc/(loss)

Chg in Wkg.Cap.

28

(1)

21

(295)

(345)

Other Operating CF

(8)

(3)

(6)

Net Operating CF

17

30

27

(194)

(105)

FY Oct

Capital Exp.(net)

(100)

(100)

Other Invts.(net)

(427)

(203)

Invts in Assoc. & JV

Div from Assoc & JV

Other Investing CF

Net Investing CF

(427)

(303)

(100)

Div Paid

Chg in Gross Debt

(19)

(5)

(11)

495

Capital Issues

788

Other Financing CF

(19)

(5)

(11)

788

495

(1)

0
(205)

Net Financing CF
Currency Adjustments
Chg in Cash
Opg CFPS (sen)
Free CFPS (sen)

(2)

18

388

(1)

(4.1)
6.7

2.1

9.5

0.9

15.4

36.7

1.5

11.9

4.2

(44.7)

(31.2)

60
40
20
0
2014F

2015F

2016F

Capital Expenditure (-)

90% balance payment for


Semenyih land acquisition

Cash consideration for the


proposed acquisitions

Proceeds from rights issue

Source: Company, AllianceDBS

Page 35

Company Focus

Eco World Development Bhd

Margins Trend

Quarterly / Interim Income Statement (RM m)


FY Oct

1Q2013
1Q2013

2Q2013
2Q2013

3Q2013
3Q2013

4Q2013
4Q2013

1Q2014
1Q2014

2Q2014
2Q2014

35

34

44

44

23

27

(25)

(23)

(28)

(32)

(18)

(20)

Gross Profit

10

11

16

12

Other Oper. (Exp)/Inc

(3)

(4)

(3)

(5)

(3)

(3)

Operating Profit

13

Other Non Opg (Exp)/Inc

Associates & JV Inc

(1)

(3)

35%

30%

Revenue
Cost of Goods Sold

Net Interest (Exp)/Inc


Exceptional Gain/(Loss)
PrePre-tax Profit

13

Tax

(2)

(4)

(1)

Minority Interest

Net Profit

11

Net profit bef Except.

11

EBITDA

13

Revenue Gth (%)

42.4

(3.7)

31.1

0.0

(48.6)

18.7

EBITDA Gth (%)

40.7

(1.8)

85.4

(48.9)

(64.0)

45.1

Opg Profit Gth (%)

40.7

(1.8)

85.4

(48.9)

(64.0)

45.1

Net Profit Gth (%)

98.8

0.6

63.8

(99.8)

2,814.8

226.8

Gross Margins (%)

28.9

32.1

35.9

26.6

21.9

24.6

Opg Profit Margins (%)

20.3
19.0

20.7

29.3

15.0

10.5

12.8

19.9

24.9

0.1

3.5

9.6

Growth

Margins

Net Profit Margins (%)

Source: Company, AllianceDBS

Page 36

25%
20%
15%
10%
5%
0%
-5%

2
1
0
2
Q
2

2
1
0
2
Q
3

2
1
0
2
Q
4

3
1
0
2
Q
1

Operating Margin %

3
1
0
2
Q
2

3
1
0
2
Q
3

3
1
0
2
Q
4

4
1
0
2
Q
1

Net Income Margin %

4
1
0
2
Q
2

Company Focus

Eco World Development Bhd

Valuation
Premium valuation.
valuation ECW is currently trading at 53x FY13 PE.
While the valuation appears excessive at this juncture, we
expect it to moderate to a more palatable level by FY16,
when the full impact of its aggressive property sales will be
reflected. Based on its current share price, we estimate fullydiluted (before warrant dilution) FY15F PE of 43x and FY16F
PE of 17x, after taking into consideration the RM788m rights
issue with warrants.

Expect strong earnings growth.


growth Given that EWSB has
already achieved RM1.1bn sales as at Mar14, we believe
ECW will continue to ride on the strong sales momentum for
the other pipeline projects. Nevertheless, ECWs net gearing
level may remain elevated at 0.7x by FY14, as ECW will
assume RM2bn debt from the proposed corporate exercise,
as well as the requirement for more working capital to roll
out its projects.

We derive our implied TP of RM6.00 after applying a 20%


discount to our ex-all RNAV of RM2.00 (based on
benchmark price of RM5.35). Our property sales
assumptions of RM1.7bn and RM2bn for FY14 and FY15 are
below managements total target of RM5bn for the coming
two years. This is mainly to account for the weaker property
sentiment amid more cautious spending by potential
property buyers.

Solid backing from substantial shareholders.


shareholders Upon
completion of the proposed corporate exercise (share split,
share subscription, rights issue with warrants, placement),
EWH will be the largest shareholder with a 32% stake, while
Sinarmas Harta and Liew Tian Xiong will own 26% and 11%
respectively. We believe the substantial shareholders will be
committed to drive ECW to greater heights, given its
ambitious plan to catapult ECW into one of the top property
developers in Malaysia.

RNAV
Pro j e c t
Ec o Ce n tra l Saujana Glenmarie
Eco Sky
Eco Majestic
Eco Sanctuary
Eco Majestic 2
Ec o So u th Eco Botanic
Eco Spring
Eco Tropics
Eco Business Park 1
Eco Business Park 2
Eco Business Park 3
Ec o No rth Eco Terraces
Eco Meadows
Eco Macalister

To ta l

GDV (R M m)
90
974
11,144
8,000
3,500
2 3 ,7 0 8
3,794
5,871
3,400
3,799
3,009
2,000
2 1 ,8 7 3
338
916
190
1 ,4 4 4
4 7 ,0 2 5

After tax
proforma shareholders fund

Pro j e c t NPV@ 1 0 %
18
102
820
544
199
1 ,6 8 3
301
280
195
416
349
232
1 ,7 7 2
46
109
29
184
3 ,6 4 0

R NAV
2,730
3,113
5,843

R NAV/s h a re
e x-ri g h ts TP
I mp l i e d TP (c u m)

2.47 Excluding 7-year warrants


2 .0 0 20% discount
6 .0 0

Source: AllianceDBS

Page 37

Company Focus
Eco World Development Bhd

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends


GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by AllianceDBS Research Sdn Bhd (ADBSR) (formerly known as HwangDBS Vickers Research Sdn Bhd), a subsidiary of
Alliance Investment Bank Berhad (AIBB) and an associate of DBS Vickers Securities Holdings Pte Ltd (DBSVH). This report is solely intended for
the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates
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be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may
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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which
the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results.
Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a
representation and/or warranty by the Alliance Bank Group (and/or any persons associated with the aforesaid entities), that:
(a)
(b)

such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
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Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
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nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months.
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the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in
this report (interest includes direct or indirect ownership of securities).
COMPANYCOMPANY-SPECIFIC / REGULATORY
REGULATORY DISCLOSURES
1.
DBS Bank Ltd., DBS Vickers Securities (Singapore) Pte Ltd (DBSVS), their subsidiaries and/or other affiliates do not have a
proprietary position in the securities recommended in this report as of 17 Jul 2014.
2.

DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may beneficially own a total of 1% of any class of
common equity securities of the company mentioned as of 21 Jul 2014.

3.

Compensation for investment banking services:

Page 38

Company Focus
Eco World Development Bhd
DBS Bank Ltd., DBSVS, DBSVUSA, their subsidiaries and/or other affiliates may have received compensation, within the past 12
months, and within the next 3 months may receive or intends to seek compensation for investment banking services fromthe
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for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR


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Page 39