Eco World (ECW MK): From Stability To Scalable Growth; BUY

• Initiating coverage with a BUY and MYR3.00 TP, 43% upside and c.4% FY26F(Oct) yield. Our valuation is on par with RNAV/share (+2% ESG premium) and DCF for data centre (DC) contributions. This premium valuation vis-a-vis peers is justifiable, given Eco World is a sector upcycle proxy, and is also entering a high-growth phase via: i) Activation of new projects, ii) landbanking exercise, and iii) investment in DC asset. The leasing income that will kick-in from late FY27 should provide ECW with a better quality and stable earnings base.
• Sector bellwether to ride on the current property sector upcycle. ECW is the best proxy for Malaysia’s property market. Its landbank is strategically located at key high-growth areas – ie Klang Valley and Iskandar Malaysia which are benefitting from upcoming infrastructure (eg the Rapid Transit System (RTS) link in Johor Bahru), and influx of foreign direct investments in Johor and Selangor. The company has a total landbank of 4,611 acres, of which 3,515, 943, and 153 acres are located in the central, southern, and northern regions. The rapid monetisation of 410 acres of industrial land over the past year, on top of usual landbank utilisation, indicates a highly efficient landbank turnaround time and solid management execution track record.
• Solid war chest to grow property investments and for landbanking. The disposal of 410 acres of industrial land has provided ECW with proceeds of MYR1.71bn. In addition to the MYR5.22bn in unbilled sales and MYR600m in sukuk funding, these cash inflows come in handy to fund working capital to kick-start new projects, finance investments in DC facilities, and acquire new land. We expect net gearing to hover around the current level of 0.55x over the next 1-2 years, as ECW is on an expansionary mode.
• Three key projects to drive property sales growth from FY26. It has been a few years since ECW kick-started any sizeable greenfield development. In the pipeline are Eco Radiance (Semenyih), Eco Botanic 3 (Iskandar Malaysia), and Eco Business Park (EBP) VII (Negeri Sembilan). These three key greenfield projects set for activation should drive property sales growth from FY26 onwards, in our view. Cash flow should be manageable too, given the rest of its projects are entering their lifecycles of 8-10 years. Hence, cash flow from these matured projects should be rather consistent.
• Recurring income from DCs to bump up FY28F earnings. FY28F earnings should see a quantum leap on maiden contributions from ECW’s build-to-lease DC with Pearl Computing Malaysia. We estimate initial contributions from the lease income (at PBT) at c.MYR100-110m pa, representing >20% of our FY27F earnings. Key risks: i) Unexpected slowdown in economic growth and ii) unfavourable turn in regulations for DCs.

Share Performance (%)

Eco World Development Group (ECW MK) Price Chart

Source: Bloomberg

Forecasts and Valuation

Emissions And ESG

Trend analysis

Scope 1 and Scope 2 saw a reduction over the last three years. In FY24, ECW commenced the utilisation of solar power from on-site solar PV systems at its sales galleries, office and retail mall, as part of its ongoing efforts to promote clean energy.

Source: Company data, RHB

Latest ESG-Related Developments

ECW installed EV charging stations across their projects to provide the infrastructure needed for the transition to green transportation.

ESG Unbundled

Overall ESG Score: 3.1 (out of 4)

Last Updated: 10 July 2025

E Score: 3.0 (GOOD)
89% of ECW’s development projects received green certification. There are 33 total certifications from GreenRE, GBI, LEED and Green Mark.

S Score: 3.3 (EXCELLENT)
ECW invested MYR2.34m into CSR initiatives and sponsorships in FY24. It also achieved customer satisfaction scores of >80% for the sales and marketing, sales administration and ECW Residence Club divisions.

G Score: 3.0 (GOOD)
The Board now comprises 11 Directors, with a majority (55%) of Independent Directors and 36% women Directors. The Whistleblowing Committee comprises three Independent Directors.

ESG Rating History

Source: RHB

Financial Exhibits

Income statement (MYRm)

Cash flow (MYRm)

Balance sheet (MYRm)

Key metrics

Source: Company data, RHB

Investment Thesis

Proxy for property sector upcycle

ECW is well positioned for the prevailing broad-based sector upcycle. The company’s landbank is mostly located at high-growth areas in the country, ie the Klang Valley and Iskandar Malaysia, which stand to benefit from: i) Upcoming infrastructure (eg the RTS link in Johor Bahru), ii) incentives under the Johor-Singapore Special Economic Zone or JS-SEZ, and iii) influx of foreign and domestic direct investments into Johor and Selangor.

ECW currently has 4,611 acres of remaining land in total across key hotspots in Malaysia, carrying a total GDV of MYR55.7bn. These include 3,515 acres in the central region (76%), 943 acres in the southern region (21%), and 153 acres in the northern region (3%). There is a total of 17 ongoing projects, with the majority of them located in West Malaysia’s central region. Its exposure to Penang is the smallest, with only three ongoing projects worth a balance GDV of only MYR4.7bn.

Apart from the typical bread-and-butter residential township homes, the high-rise duduk series and commercial products, the industrial segment is increasingly important, given pent-up demand and past successes. ECW currently has five ongoing industrial projects in Johor and Selangor, and one upcoming EBP VII in Negeri Sembilan.

Over the last four years, despite the COVID-19 pandemic, ECW has consistently achieved over MYR3.5bn in property sales per financial year. In FY24, the industrial segment made up 30% of the company’s total property sales while, for 7MFY25, the segment accounted for 40% of the total. EBP I, II, and III in Iskandar Malaysia, and EBP V in Selangor, are currently the key sales contributors.

Meanwhile, Eco Botanic and Eco Botanic 2, Eco Spring, and Eco Summer in Iskandar Malaysia are the major township sales drivers. This also very much indicates the significance of the Iskandar Malaysia market to ECW.

Figure 1: ECW’s historical property sales and growing sales from the industrial segment (MYRbn)

Source: Company data

While ECW has a major presence around the Second Link – Nusajaya, Senai, Kulai, and Tebrau areas in Iskandar Malaysia – it has also cemented its foothold in the southern corridor of the Greater Klang Valley market, with its latest 847-acre land acquisition in Semenyih. ECW will have three township developments there, namely Eco Majestic (launched in 2014), Eco Forest (launched in 2017), and Eco Radiance. The latter is deemed a continuation of Eco Forest, as it only has a remaining landbank of 136 acres. Management will likely price Eco Radiance products at a slight premium to Eco Forest ones.

Figure 4: Entrenching the southern corridor of the Greater Klang Valley market

Source: Company data

Figure 5: Strategic exposure in key growth areas in Iskandar Malaysia

Source: Company data

Efficient deployment of land disposal proceeds to pursue greater growth

ECW sold a total of five parcels of land over the past 12 months in FY24 and FY25: i) 123 acres for MYR402m at Quantum Edge to Microsoft Payments (Malaysia), ii) 57 acres for MYR224m at Quantum Edge to Princeton Digital Group, iii) 139 acres for MYR694m in EBP I to Microsoft Payments (Malaysia), iv) 58 acres for MYR266m at EBP V to Pearl Computing Malaysia, and v) 33 acres for MYR119m at EBP II to Deye New Energy Technology Malaysia.

The rapid monetisation of these 410 acres of industrial land to reputable strategic partners within a short span of time indicates a highly efficient landbank turnaround time and solid management execution track record. The achievement for this industrial segment is on top of highly successful existing township projects in Malaysia.

The MYR1.71bn proceeds from the disposal of the industrial land parcels will come in handy. In addition to the MYR5.22bn in unbilled sales (roughly MYR4bn from property projects alone) and MYR600m in sukuk funding, these cash flows will be important for ECW to fund working capital needed to kick-start new projects, finance investments in DC facilities, and acquire more land. Based on its current landbank profile, we think management is keener to replenish its Iskandar Malaysia landbank due to the fast depletion rate there.

We expect ECW’s net gearing to hover at around 0.6x over the next 1-2 years, as the company is on an expansionary mode and has plans to beef-up its recurring income portfolio. We understand that management is in the midst of negotiating with potential institutional equity partners to jointly invest in the DC asset, which may cost about MYR4bn, as it aims to own up to 80% of the asset eventually.

Three projects to drive property sales from FY26 onwards

It has been a few years since ECW kick-started any sizeable greenfield development. In the pipeline are three greenfield projects to be activated: i) EBP VII (Negeri Sembilan), ii) Eco Botanic 3 (Iskandar Malaysia) in 4QCY25, and iii) Eco Radiance in 1QCY26. These three projects are expected to drive property sales growth from FY26 onwards.

EBP VII is the first EBP project in Negeri Sembilan, whereby ECW will hold a 55% stake. SD Guthrie (SDG MK, BUY, TP: MYR5.65) and NS Corp will have stakes of 30% and 15% in this development. EBP VII is located at Malaysia Vision Valley 2.0 or MVV 2.0 and has a GDV of MYR2.95bn. It will feature industrial lots, ready-built factories, and commercial properties tailored to high-growth sectors, including aerospace, E&E, logistics, and biotechnology. It is accessible via the proposed Nilai-Labu Expressway, which will connect to Kuala Lumpur International Airport or KLIA and Port Klang.

We understand this project will unlikely cater for any DC usage, and mainly be targeted at industries that will rely on the airport and highway amenities. Given ECW’s track record in attracting big multinational corporates at all its EBPs, we believe it will similarly surprise the market on its deliveries for EBP VII.

Figure 6 & 7: High-profile investments secured by ECW (Haitian Group and Deye New Energy Technology)

These figures show groundbreaking and signing ceremonies for major investments. The first caption reads “Haitian Group Breaks Ground on Its RM3 Billion Manufacturing Hub at Eco Business Park II, Iskandar Malaysia”. The second reads “ECOWORLD INDUSTRIAL DEAL FLOW CONTINUES WITH SALE OF 32.9 ACRES FOR RM119 MILLION AT ECO BUSINESS PARK II”. Both highlight successful deals with major Chinese industrial companies, Deye New Energy Technology and Haitian Group, for developing manufacturing facilities in ECW’s business parks.

Source: Company data

Meanwhile, Eco Botanic 3 is just a continuation of Eco Botanic and Eco Botanic 2, which have a remaining landbank of only 63 acres. Eco Botanic 3 will likely repeat the success of the previous phases given the popularity of the community there, as University of Southampton Malaysia campus and Jaya Grocer’s largest store in Malaysia are located at the Eco Botanic township. Eco Radiance in Semenyih, as mentioned earlier, will be a new project in the southern corridor of the Greater Klang Valley region.

As cash flow commitments are typically high during the initial stages of a greenfield development, we think the mobilisation is especially easy for Eco Botanic 3 and Eco Radiance – leveraging on the overheads and equipment from existing projects nearby. Cash flow should be manageable, in our view, given the rest of ECW’s projects are already entering their lifecycles of 8-10 years hence, cash flow from these matured projects should be rather consistent and stable.

Quantum leap in FY28 earnings from DC income

In Feb 2025, ECW announced its disposal of 58 acres of leasehold industrial land at EBP V in Selangor for MYR266.1m to Pearl Computing Malaysia, which is linked to the US tech giant Google. Separately, both ECW and Pearl Computing Malaysia also entered into a build-and-lease agreement for the shell and core of a DC to be built on 92.44 acres of land at EBP V. The lease agreement with Pearl Computing Malaysia is for an initial term of 20 years, with total rent payable amounting to MYR4.8bn. The lease is renewable for up to 10 additional years.

The construction of the DC is expected to start in 3QCY25 and be completed in 2HCY27. We estimate that the construction cost for the DC could be over MYR4bn, and the asset may potentially provide a yield of more than 6%. Based on our rough calculations – assuming a debt/equity ratio of 70:30 – the initial contribution from the lease income (at PBT level) could amount to about MYR100-110m pa for ECW’s 80% stake in the DC facility. This represents more than 20% of our FY27F earnings. Contributions should kick-in from late FY27 onwards, and this asset should anchor the recurring income portfolio over the long term.

Re-strategise the relationship with EWI Capital

ECW is a major shareholder of EWI Capital (ECWI MK, NR) – formerly known as EcoWorld International – with a 29% stake. In Apr 2025, ECWI announced the proposed termination of a collaboration agreement, whereby the geographical restrictions previously agreed between the two parties will be removed – enabling ECWI to invest in and undertake property projects in Malaysia. The name change to ECWI was also proposed.

To address the potential conflict of interest situations between ECWI and ECW seeking to operate in the same industry and geographical market, Tan Sri Liew Kee Sin and Datuk Heah Kok Boon voluntarily resigned as directors of ECWI on 30 Apr 2025. Tan Sri Liew is ECW’s executive chairman while Datuk Heah is an alternate director of the company. The above exercise was completed in Jun 2025 following the conclusion of an EGM to obtain shareholders’ approval. As a result of this exercise, ECW will de-recognise its 29% stake in ECWI as an associate company. Instead, the company recognises it as a simple investment only.

We think the investment value of ECWI will rise, as the company has already started to make some initiatives to develop projects domestically. Hence, earnings should start gradually seeing a turnaround. In May, ECWI and JLand Group (JLG) – the real estate and infrastructure arm of Johor Corp – have signed a framework agreement to explore joint real estate development opportunities in both Malaysia and Australia. While JLG has shown interest in ECWI’s residential site at Macquarie Park, Sydney, the latter is considering the former’s involvement in a proposed 300-acre industrial development within Ibrahim Technopolis (IBTEC). IBTEC is JLG’s flagship integrated township in Sedenak, Johor.

Formal agreements are expected to be signed by end CY25, and we believe this is just the first step for ECWI to explore more development opportunities domestically.

Financial Analysis And Overview

Land disposals to boost revenue and earnings in FY25F-26F

ECW’s earnings in FY25F-26F will largely be boosted by MYR1.71bn worth of land disposals. So far in 1HFY25, the company has already recognised the sale of 123 acres of land at Quantum Edge (first parcel) to Microsoft Payments (Malaysia). Meanwhile, 2QFY25 also saw the full consolidation of the Eco Grandeur and EBP V projects following the recent acquisition of the remaining 40% stake not owned. Hence, GPM for 1HFY25 improved to 30.2% vs 26.5% in 1HFY24, mainly contributed by industrial land sales and cost savings from ongoing and completed projects.

In the coming quarters, part of the second parcel disposal in EBP I to Microsoft Payments (Malaysia) may be recognised, as the sale & purchase agreement (SPA) turned unconditional in Jun 2025, as we understand the revenue recognition is split to the land sale and infrastructure portions. The bulk of the remaining land disposals will likely be recognised in FY26, in our view.

Future revenue to be recognised is at an all-time high.

Due to robust property sales, future revenue currently amounts to MYR5.22bn (more than MYR4bn are from property developments). This provides significant earnings visibility and cash flow certainty over the next 2-3 years.

We expect FY25 property sales to surpass management’s target of MYR3.5bn.

ECW already achieved MYR2.99bn worth of property sales in 7MFY25, representing 85% of its FY25 sales target of MYR3.5bn. As mentioned earlier, all the industrial parks – including Quantum Edge contributed 40% of total sales. We believe the company will likely surpass its full-year target by end FY25. A number of projects were launched in Feb-May 2025, including shop offices in Eco Spring, Eco Botanic 2, and EBP III, as well as some landed homes at Eco Spring, Eco Tropics, and Eco Horizon.

High earnings growth and decent DPS for FY25F-27F.

Taking into account the timing of land sales recognition and future revenue to be recognised, we estimate earnings growth of 36%, 9%, and 13% for FY25-27 (FY25: MYR413m, FY26: MYR451m, FY27: MYR511m). While FY25F-26F earnings will be largely driven by land sales, FY27F’s bottomline is expected to be much stronger due to the likely maiden contributions from the three new projects, ie EBP VII, Eco Botanic 3, and Eco Radiance. DC income will also kick in from 4QFY27. Note: Earnings from both EBP VII and the DC will be captured under share of results of JVs.

There is no fixed dividend payout policy being set, but ECW has been ramping up its dividend payouts in absolute terms, from a mere 2 sen in FY20, 4 sen in FY21, 5 sen in FY22, and 6 sen for both FY23 and FY24. Note: The high dividends in FY22 and FY23 were largely due to the capital reductions from EWI earlier as well as relatively high cash generation from operations.

Going forward, we believe ECW will likely keep its dividend payout ratio at around the 50% level, and should at least maintain the quantum of its DPS at 6 sen. Our DPS forecast for FY25-27 is 7 sen, 8 sen, and 9 sen. Over the longer term, the consistent income contributions from the DC should also help to sustain ECW’s dividend payouts.

Figure 8: GPM forecast is higher in FY25-26 due to land disposals

Source: Company data, RHB

Figure 9: ECW’s historical DPS

Source: Company data

A recap of 1HFY25 results.

The 2QFY25 results took into account some non-cash items a: i) MYR174m gain on deemed disposal & acquisition that is related to the 40%-stake acquisition in the Eco Grandeur and EBPV projects, ii) MYR90.95m loss of deemed disposal that is related to ECWI, and iii) MYR68m impairment loss arising from the Bukit Bintang City Centre or BBCC project due to the deferred launch of remaining parcels and signature tower, which resulted in a longer discounting period used to reassess carrying value.

The net impact from these three items is a mere MYR15.05m in non-cash accounting gains being recognised. So far, ECW has already declared a 3 sen dividend for 1HFY25.

Valuation And Recommendation

Excellent management’s execution justifies premium valuation

We value ECW at RNAV per share with a 2% ESG premium. We also factor in the DCF value from the contributions of the DC asset. The premium valuation compared to the other developers under our coverage is primarily due to: i) Management’s solid execution track record in project delivery and sourcing clientele for its industrial developments, ii) efficient landbank turnaround time, and iii) high-growth phase of earnings over the next 3-4 years from FY25 via the activation of new projects and maiden contributions from the DC asset.

Our valuation is reasonable, considering that the local property market has been in an upcycle since 2023. Furthermore, benchmarking against SP Setia’s (SPSB MK, BUY, TP: MYR1.72) historical valuations before the departure of Tan Sri Liew, SPSB used to trade up to just a 10% discount to RNAV in 2011 during the previous property market upcycle. Unlike SPSB in the past, ECW is now beefing up its recurring income portfolio – this, in our view, should help to enhance earnings quality and mitigate the cyclical earnings trends typical for a developer.

Figure 10: ECW’s historical discount to RNAV

Source: Bloomberg, RHB

Figure 11: SP Setia’s historical discount to RNAV (before the departure of Tan Sri Liew)

Source: Bloomberg, RHB

Figure 12: ECW’s RNAV estimate

Source: Company data, RHB

Figure 13: Peer comparison table (as of 16 July 2025)

Note: ^FY25-26 valuations refer to those of FY26-27
Source: Bloomberg, Company data, RHB

Key Risks

Unexpected slowdown in global economic growth. This is the key risk that should affect the whole property sector as well as ECW. If there is an unexpected slowdown in global economic growth (or global recession), Malaysia’s GDP growth will also be negatively affected, posing downside risk to demand for property. Earnings for ECW will, therefore, be dampened.

Unfavourable turn in regulations for DCs. As ECW also has an exposure to the DC segment via land disposals and build-and-lease agreement, we think any unfavourable turn in regulations will likely affect the subsequent negotiations and completion of ongoing transactions. We think the risk for the build-and-lease agreement is minimal, given that the off-taker is Pearl Computing Malaysia, which is linked to Google. In our view, US hyper-scalers and countries aligned to America – including the likes of the UK, Netherlands, Australia, and Japan, which are expanding their DCs aggressively – will continue to have unfettered access to US artificial intelligence or Al chips, albeit with certain conditions.

So far, all of the land parcels sold to the DC players are on track for completion. Amongst all, the sale of the first parcel to Microsoft Payment (Malaysia) was already completed and the SPA for the second parcel has turned unconditional in Jun 2025.

ESG Efforts

We ascribe an ESG score of 3.1, above our country median of 3.0. The company is quite proactive in improving its ESG initiatives and has been a constituent of the FTSE4Good Bursa Malaysia Index since 2020. The key initiatives undertaken include:

Environment:

• ECW is enhancing its climate change commitment by setting short-, mid-, and long-term targets to achieve net zero carbon by 2050. It plans to reduce Scope 2 emissions by 20% and 30% by 2025 and 2030. The company has already surpassed Scope 2 emissions reduction targets by achieving a 36% cut in FY24;
• 89% of ECW’s launched projects have obtained Green Certifications from either GreenRE, GBI, LEED, or Green Mark;
• The company has installed solar photovoltaic or PV systems with a total capacity of 1,955kWp at The Tomorrow Centre or TTC office, the Eco Grandeur, Eco Ardence, Se.duduk D’Kajang sales galleries, and Sanctuary Mall;
• The company procured green construction materials with recycled content and prioritised sourcing materials regionally. It also utilised rainwater at sales galleries and sourced water from detention ponds at construction sites.

Social:

• Zero work-related incidents, fatalities and lost-time injuries were recorded over a total of 46.96m man hours;
• The company is also launching more innovative and affordable products such as the duduk apartments to address social concerns over the rising cost of living;
• ECW achieved customer satisfaction scores of more than 80% for the sales & marketing, sales administration, and EcoWorld Residence Club divisions;
• The company invested MYR2.34m for community development programmes, including tree planting, recycling, donation, and clean-up events.

Governance:

• ECW maintained 36% women directors on the board of directors, which is above the Malaysian Code on Corporate Governance’s 30% recommendation;
• Climate considerations are embedded into the company’s governance framework. The board holds strategic oversight on ESG- and climate-related risks and opportunities, while climate considerations are integrated into decision-making processes for major investments. Every year, the board also reviews sustainability policies, initiatives, and key performance indicators to ensure alignment with long-term goals;
• In FY22-24, all of ECW’s operations underwent corruption-related risk assessments, and no substantiated incidents of corruption or bribery have been reported.

Key Senior Management Team

Younger team modernising the “Tan Sri Liew” effect

Executive Chairman Tan Sri Liew and Non-Independent Non-Executive Director Tan Sri Abdul Rashid Bin Abdul Manaf co-founded ECW after leaving SPSB more than a decade ago. Tan Sri Liew, together with his son Liew Tian Xiong – who is also the deputy CEO – hold a collective stake of 29.4% in the company. Dato’ Leong Kok Wah, through Sinarmas Harta, is the largest shareholder with a 32.7% stake.

Both CEO Dato’ Chang Khim Wah (CEO) and Deputy CEO Tian Xiong are currently leading the company. Under Dato’ Chang, ECW saw a few major changes, including aggressive marketing and advertising campaigns to create brand awareness during the company’s inception stage. He also led the company through the challenging COVID-19 period via successful effective cost cutting and de-gearing. Together with Tian Xiong, ECW also underwent internal digital transformation, and – later on – embarked on new projects such as Quantum Edge and the build-and-lease contract for the DC asset.

Many of the divisional general managers have worked with Tan Sri Liew for more than 10 years, some since his previous company. They are highly experienced in the sections they manage. These include Dato’ Ho Kwee Hong (divisional general manager for Eco Central), Phan Yan Chan (divisional general manager for Eco South), Yap Yoke Ching (divisional general manager for Eco Central), Dato’ Ir Chan Soo How (divisional general manager for Eco North), and Sri Ram A/L Sivasambu (BBCC Development CEO).