Malaysia’s benchmark index retreated as profit-taking in key heavyweights weighed on sentiment, while overall market activity remained active. Summary FBM KLCI fell 0.83% to 1,684.93 , dragged by losses in banking and selected large-cap names, despite steady trading participation. Market Performance FBM KLCI : 1,684.93 (-0.83%) FBM Mid 70: -0.00% (flat) FBM Small Cap: -0.23% FBM ACE: +0.20% Broad market was mixed , with weakness concentrated in large caps. Market Breadth & Trading Activity Total volume: 3.54 billion shares Total value: RM4.19 billion Gainers: 456 Losers: 678 Unchanged: 550 Market breadth turned negative , reflecting cautious sentiment. Top Movers – KLCI Gainers Axiata (6888.MY) +1.54% Petronas Gas (6033.MY) +1.18% Sunway (5211.MY) +1.15% Losers Hong Leong Bank (5819.MY) -3.29% Maybank (1155.MY) -3.02% CIMB (1023.MY) -2.47% Banking sector weakness was the main ...
Results track expectations
ECW’s 1QFY10/16 net profit (+>100% YoY) was within our expectation but slightly below consensus. 4MFY16 actual sales are on track to meet its own sales target of MYR3b (excluding the overseas projects pending the listing of its associate company) for FY16. Potential enbloc sales at Bukit Bintang City Centre (BBCC) will lower the overall project risk. We maintain earnings forecasts, MYR1.67 RNAV-TP and BUY rating.
Earnings driven by better margin and lower taxes
ECW’s 1QFY10/16 net profit was MYR20.7m (>+100% YoY, +5% QoQ) accounting for 21%/18% of our and consensus full-year estimates. The strong YoY earnings growth was mainly driven by better operating margin and lower tax charges. EBIT margin improved by 2ppt YoY and QoQ to 7.8% on lower administrative and marketing expenses. As at end-Jan 2016, ECW’s net gearing stood at 0.46x, from 0.37x at end-Oct 2015.
On track to meet its ambitious sales target
ECW has locked in MYR607.8m in property sales in 4MFY16, 20% of its MYR3b sales target (excluding ≈MYR1b sales from its overseas projects via associate company) for FY16 - on track. Sales should pick up strongly with the potential enbloc sale of retail spaces in BBCC. The enbloc sale will lower the overall project risk – a positive in view of stiff competition from upcoming projects such as TRX and Bandar Malaysia. ECW will softlaunch the service apartments and strata offices of BBCC by end-March 2016.
Maintaining earnings forecasts
Our sales assumption for FY16 is MYR2.8b, excluding the potential sales from its overseas projects via its associate company. Our MYR1.67 TP is based on an unchanged 40% discount to MYR2.79 RNAV. Unbilled sales stood at MYR4.4b at Jan 2016 (1.2x our FY16F revenue), providing medium-term earnings visibility.
Source: Maybank Research, 25 March 2016
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