ECOWLD (8206) - Eco World Development Group Bhd - Ex for rights and free warrants
Target RM2.60 (Stock Rating: ADD)
Eco World shares went ex for the 1-for-2 rights issue with 4 warrants-for-5 rights shares today. The exercise comes on the heels of the 1-into-2 share split in Jan and the acquisition of landbank from Eco World Sdn Bhd (EWSB) for RM3.8bn in Feb. The next milestone is the proposed 20% share placement targeted for completion in 2Q15. We maintain our Add recommendation as Eco World remains one of our top picks in the sector. However, the target price is raised after adjusting RNAV for the appreciation of selected landbank and lowering our target basis of a 10% discount to RNAV from 20% in view of the near completion of the restructuring exercise. Potential re-rating catalysts include strong new sales and continuous landbanking.
What Happened
The share price of Eco World has gone ex for the 1-for-2 rights issue (at RM1.20/share) as well as the 4 warrants-for-5 rights shares (7 years to expiration and exercise price of RM2.08) subscribed. The 657m rights issue will increase the paid-up capital of Eco World to 1.97bn shares. The rights to the rights issue and free warrants will start trading on 6 Mar and cease quotation on 13 Mar.
What We Think
We view positively the rights issue with free warrants as it will raise RM788m and help reduce the group’s gearing to around RM1.2bn. The 6 Feb completion of the acquisition of EWSB's landbank also consolidated all the Malaysian landbank of the Eco World group under one umbrella and confirmed Eco World's status as the flagship development arm of Tan Sri Liew Kee Sin and family. Upon completion of the 20% private placement, likely in 2Q, the paid-up cap of Eco World will increase to 2.36bn shares and help improve the liquidity of the stock as well as lower gearing further.
What You Should Do
Despite the decent YTD share price performance, investors should continue accumulating Eco World as the group was one of the few developers that bucked the softening sales trend in 2014. We believe it has a good chance of repeating that outperformance in 2015. Also, Eco World's share price will continue to be driven by landbanking efforts and the 4 Feb completion of the Pudu Jail joint venture is one such example. The company has yet to finalise the acquisition of 470 acres of land in Batu Kawan, Penang, which will make it one of the larger land owners in that growth corridor.
Source: CIMB Daybreak - 04 March 2015
Target RM2.60 (Stock Rating: ADD)
Eco World shares went ex for the 1-for-2 rights issue with 4 warrants-for-5 rights shares today. The exercise comes on the heels of the 1-into-2 share split in Jan and the acquisition of landbank from Eco World Sdn Bhd (EWSB) for RM3.8bn in Feb. The next milestone is the proposed 20% share placement targeted for completion in 2Q15. We maintain our Add recommendation as Eco World remains one of our top picks in the sector. However, the target price is raised after adjusting RNAV for the appreciation of selected landbank and lowering our target basis of a 10% discount to RNAV from 20% in view of the near completion of the restructuring exercise. Potential re-rating catalysts include strong new sales and continuous landbanking.
What Happened
The share price of Eco World has gone ex for the 1-for-2 rights issue (at RM1.20/share) as well as the 4 warrants-for-5 rights shares (7 years to expiration and exercise price of RM2.08) subscribed. The 657m rights issue will increase the paid-up capital of Eco World to 1.97bn shares. The rights to the rights issue and free warrants will start trading on 6 Mar and cease quotation on 13 Mar.
What We Think
We view positively the rights issue with free warrants as it will raise RM788m and help reduce the group’s gearing to around RM1.2bn. The 6 Feb completion of the acquisition of EWSB's landbank also consolidated all the Malaysian landbank of the Eco World group under one umbrella and confirmed Eco World's status as the flagship development arm of Tan Sri Liew Kee Sin and family. Upon completion of the 20% private placement, likely in 2Q, the paid-up cap of Eco World will increase to 2.36bn shares and help improve the liquidity of the stock as well as lower gearing further.
What You Should Do
Despite the decent YTD share price performance, investors should continue accumulating Eco World as the group was one of the few developers that bucked the softening sales trend in 2014. We believe it has a good chance of repeating that outperformance in 2015. Also, Eco World's share price will continue to be driven by landbanking efforts and the 4 Feb completion of the Pudu Jail joint venture is one such example. The company has yet to finalise the acquisition of 470 acres of land in Batu Kawan, Penang, which will make it one of the larger land owners in that growth corridor.
Source: CIMB Daybreak - 04 March 2015
