ECOWLD (8206) - Eco World Bhd Shows Deep Value
BY YIMIE YONG
KUALA LUMPUR: Eco World Development Group Bhd surged as much as 12.12% or 24 sen to RM2.20 after its non-independ- ent non-executive director Tan Sri Liew Kee Sin said he plans to step down as chairman of Bat- tersea Project Holding Co Ltd (BPHC).
Eco World (fundamental: 0.95; valuation: 0.3) closed at RM2.15, up 8.59% or 17 sen, with 4.37 million shares traded, giving it a market capitalisation of RM1.09 billion. The counter was one of the top gainers yesterday.
Liew was quoted in a local news report as saying he had ten- dered his resignation from BPHC, and was “waiting for a response” from the latter’s board.
BPHC is a joint venture com- pany owned by S P Setia Bhd (40%), Sime Darby Bhd (40%) and the Employees Provident Fund (20%). It owns the Batter- sea Power Station redevelop- ment project in London, United Kingdom.
KUALA LUMPUR: Eco World Development Group Bhd surged as much as 12.12% or 24 sen to RM2.20 after its non-independ- ent non-executive director Tan Sri Liew Kee Sin said he plans to step down as chairman of Bat- tersea Project Holding Co Ltd (BPHC).
Eco World (fundamental: 0.95; valuation: 0.3) closed at RM2.15, up 8.59% or 17 sen, with 4.37 million shares traded, giving it a market capitalisation of RM1.09 billion. The counter was one of the top gainers yesterday.
Liew was quoted in a local news report as saying he had ten- dered his resignation from BPHC, and was “waiting for a response” from the latter’s board.
BPHC is a joint venture com- pany owned by S P Setia Bhd (40%), Sime Darby Bhd (40%) and the Employees Provident Fund (20%). It owns the Batter- sea Power Station redevelop- ment project in London, United Kingdom.
Liew has been in the driv-
er’s seat of the iconic £8 billion
(RM43.72 billion) Battersea re-
development since its launch in
2013, and was supposed to stay
on as chairman until September.
It was announced earlier that Liew would spearhead the list- ing of Eco World International Bhd (EWI) as a special purpose acquisition vehicle for the pur- pose of investing in real estate in the UK and Australia.
Eco World had previously announced that it plans to subscribe for a 30% equity stake in EWI.
Eco World’s share price also went ex for its 1-into-2 share split yesterday, which reduces the par value of the stock to 50 sen and increases the group’s paid-up share capital to 506.6 million shares.
My View:
Let's bear in mind that its market cap now is around RM1.15bn. The 30% stake in the SPAC alone assuming the London project, which has a GDV of $3.3bn. The SPAC has a 75% option into the project, which is now almost unthinkable fort not to be approved. Being conservative let's assume a net margin of 25%.
3.3 x 0.25 = 0.825 x 3.5 = RM2.88bn x 0.75 = RM2.16bn / 5 years x 0.3 = RM678m over 5 years
Of course there are a lot of assumptions, the SPAC must be approved, then the SPAC has to take up the option, but it seems a formality to me with Liew resigning from Battersea. Cumulatively there should be RM2.16bn in net profits for the 75% stake in the SPAC. Ecoworld's 30% stake alone would technically bring in RM678m profits over 5 years.
As you all know, there are a lot of things happening under Ecoworld Bhd, the Pudu jail project, their current townships, etc... hence if you were to crunch the numbers, the stock looks to be a worthwhile investment at current level. It is somewhat shielded from the flattish local property markets. It is also technically "hedged" by being in one of the stronger property markets in the world, London. The follow on benefits and goodwill from Battersea is going straight to Ecoworld London.
Its going to be a gradual thing but I believe that the shares should be worth a market cap of RM1.5bn at least once the SPAC is approved, or around RM3.00 a share. Hence if all goes accordingly, the path for Ecoworld Bhd's share price has been mapped out according to the likely unfolding events.
The next step will be
the upcoming acquisition of 3,000 acres of landbank from Eco World Sdn
Bhd (EWSB) for RM3.8bn. The proposed 1-for-2 rights issue and 20% share
placement will take place in the coming months. Potential re-rating
catalysts include the ongoing restructuring exercise,
better-than-expected new sales and continuous land banking. The
next milestone will be the issuance of 806.85m new shares at a
subscription price of RM1.70 each for the acquisition of 3,000 acres of
landbank held by EWSB.
It was announced earlier that Liew would spearhead the list- ing of Eco World International Bhd (EWI) as a special purpose acquisition vehicle for the pur- pose of investing in real estate in the UK and Australia.
Eco World had previously announced that it plans to subscribe for a 30% equity stake in EWI.
Eco World’s share price also went ex for its 1-into-2 share split yesterday, which reduces the par value of the stock to 50 sen and increases the group’s paid-up share capital to 506.6 million shares.
My View:
Let's bear in mind that its market cap now is around RM1.15bn. The 30% stake in the SPAC alone assuming the London project, which has a GDV of $3.3bn. The SPAC has a 75% option into the project, which is now almost unthinkable fort not to be approved. Being conservative let's assume a net margin of 25%.
3.3 x 0.25 = 0.825 x 3.5 = RM2.88bn x 0.75 = RM2.16bn / 5 years x 0.3 = RM678m over 5 years
Of course there are a lot of assumptions, the SPAC must be approved, then the SPAC has to take up the option, but it seems a formality to me with Liew resigning from Battersea. Cumulatively there should be RM2.16bn in net profits for the 75% stake in the SPAC. Ecoworld's 30% stake alone would technically bring in RM678m profits over 5 years.
As you all know, there are a lot of things happening under Ecoworld Bhd, the Pudu jail project, their current townships, etc... hence if you were to crunch the numbers, the stock looks to be a worthwhile investment at current level. It is somewhat shielded from the flattish local property markets. It is also technically "hedged" by being in one of the stronger property markets in the world, London. The follow on benefits and goodwill from Battersea is going straight to Ecoworld London.
Its going to be a gradual thing but I believe that the shares should be worth a market cap of RM1.5bn at least once the SPAC is approved, or around RM3.00 a share. Hence if all goes accordingly, the path for Ecoworld Bhd's share price has been mapped out according to the likely unfolding events.
From CIMB's recent report - For Eco World's maiden year, the group
chalked up RM3.2bn in new sales, 60% above its target. This is very
impressive considering that the sales came largely from only six
projects - two in the Klang Valley (Eco Sky and Eco Majestic) and four
in Johor (Eco Botanic, Eco Tropics, Eco Spring and Eco Business Park 1).
Eco World is targeting to achieve RM7bn new sales over the next two
years.
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