Eco World Development Group Berhad (Eco World) has demonstrated solid financial performance in its latest earnings report, with its 9MFY24 core net income reaching RM232.2 million, surpassing expectations and accounting for 83% of both the company's and consensus full-year forecasts. The robust performance was largely attributed to significant cost savings realised in the third quarter of FY24. The company has declared a second interim dividend of 2 sen per share, bringing the total dividend payout for the nine-month period to 4 sen per share.

MIDF Stock Broking House have maintained a NEUTRAL rating on Eco World, revising the target price to RM1.81 from RM1.79. This adjustment follows an upward revision of earnings forecasts for FY24F, FY25F, and FY26F by 7.7%, 7.8%, and 9.3%, respectively, due to lower operational costs. The expected share price return is projected at 4.0%, with an anticipated dividend yield of 3.5%, resulting in a total expected return of 7.5%.

Eco World's sequential performance in 3QFY24 showcased a core net income increase to RM89.2 million, representing a 23.6% quarter-on-quarter rise, despite a marginal decline in topline revenue of 5.3% quarter-on-quarter. This growth was driven by lower costs associated with projects that have reached completion or are nearing completion, which in turn expanded the gross profit margin to 31% from 27% in the preceding quarter. On a year-on-year basis, the company reported a notable 35.2% increase in core net income for 3QFY24, contributing to a cumulative earnings rise of 25.9% in the nine-month period.

In terms of sales performance, Eco World achieved new sales totalling RM3.5 billion in the first ten months of FY24, successfully meeting its full-year sales target. The impressive sales figures were primarily driven by contributions from the industrial sector, including RM626 million in land sales to data centre operators. The residential segment also performed well, with eco townships accounting for 55% of sales and eco rise contributing 45%. Additionally, the company's future revenue has increased to RM4.5 billion as of August 2024, up from RM4 billion in May 2024.

Despite the strong earnings and sales performance, analysts remain cautious, maintaining a NEUTRAL rating as the potential for significant upside appears limited. Eco World is currently trading above its latest net tangible asset of RM1.66 per share, which supports the rationale for a cautious outlook amidst positive earnings visibility.