KUCHING: Earnings from Eco World International Bhd’s (EWI) proposed joint venture with Willmott Dixon (WD) in could come in earlier if the JV’s enbloc sale of its build-to-rent units materialise, analysts observed.
To note, late last year, EWI entered into a conditional SPA with Be Living (the development arm of WD) to acquire a 70 per cent stake in Be Eco World Holdings (Assetco) and Be Eco World Development Management Company (DMco) as well as six project sites (mostly with planning consents; stage 1) for 85.5 million pounds.
After deducting the projected external finance debt of 20.5 million pounds, net acquisition cost would be 65 million pounds.
The total gross development value (GDV) is estimated at 1.09 billion pounds, via its proposed JV with UK-based WD
The proposed acquisition will be carried out in two stages, with Stage 1 comprising six development projects (nearly all of which are at various stages of securing planning consent) and Stage 2 comprising another six development projects (mostly without planning consent; will be acquired later on project basis).
According to the research arm of Maybank Investment Bank Bhd (Maybank IB Research), both Stage 1 and Stage 2 have sizeable landbank with an estimated GDV of at least 2.6 billion pounds. It added that Be Living is the development arm of Willmott Dixon Holdings Ltd earlier if the JV’s enbloc sale of its BTR units materialise.
“Earnings from EWI’s proposed JV with WD could come in earlier if the JV’s enbloc sale of its BTR) units materialise.
“This is a positive as the proceeds can help to cushion new staff costs and marketing expenses for future projects,” the research team said. However, it noted that details on the JV’s development sites are still lacking. The JV’s initial acquisition of six development sites would be completed by February 2018, and it is looking to sell some BTR units there, enbloc to institutional buyers.
“If this materialises, it would lighten EWI’s balance sheet as the sales proceeds can be progressive, as construction progresses.
“This would help to cushion new staff costs and marketing expenses for the JV’s future projects. EWI may also be able to recognise earnings from the JV’s soon-to be-handed over units in 2018,” the research team opined.
Meanwhile, Maybank IB Research said that EWI would not likely raise its equity fund in the near term.
“EWI’s management is not looking to raise fund from the equity market in the near term, post-IPO listing in April 2017.
“Management prefers to fund EWI’s existing projects and new acquisitions via debt given that EWI’s balance sheet is very healthy with a cash pile of RM863 million as at end-October 2018 (36sen net cash per share),” it added.
Post the acquisition of the initial six development sites under its JV with WD, EWI’s outstanding GDV would increase to RM13 billion (from RM6.5 billion).
“EWI’s management is still actively looking for new landbank in Sydney and Melbourne,” the research team said.
Maybank IB Research pegged a ‘hold’ call on the stock.