Markets
Eco World Int’l can tap strong demand in UK
Maybank IB Research | 10 Nov 2017 00:30
Wardian London is a joint venture between Eco World International and UK-based Ballymore Group

ECO World International (EWI) has entered into a heads of agreement to partner with Wilmott Dixon (WD) to jointly develop 12 sites in Greater London and the southeast of England.

WD is a privately-owned contracting and interior fit-out group. The proposed partnership would potentially involve (i) the acquisition of a 70% interest in WD’s residential development business presently held under its Be Living subsidiary and (ii) the acquisition of a 70% interest in WD’s development management arm.

The acquisitions are expected to be formalised next month and could expand the company’s current presence in the UK by four-fold via an additional 6,700 residential units worth £2.5 bil (RM13.88 bil). The acquisition will be funded by initial product offering proceeds and debt.

The deal will mean a strengthening foothold for EWI in the mainstream market. There is also a framework agreement in place for the development of a further 1,500 units. This is on top of the existing 2,500 residential units under the joint venture with the Ballymore Group.

We understand that most of the units under the partnership are priced between £500 and £800 per sq ft. This will allow EWI to continue tapping into the strong demand in the UK’s domestic mainstream market, especially after the full completion of its London City Island project in 2019. Under the partnership, it intends to develop mainstream residential units for open market sale (OMS) and enter the build-to-rent market (BTR).

We are neutral on EWI’s latest partnership in London and make no change to our earnings forecasts at this juncture. We maintain our target price of RM1.12 and our hold rating pending further details from the management (such as land cost, joint venture structure and composition of OMS versus BTR).