The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
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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