RM8, the right price for Eco World and other picks

Don’t worry if you can’t afford Eco World’s project. If you really like this company which is being looked upon as potentially a new world class developer company, then buy their stocks. Fancy a return of 72% based on the price you pay? You may get it if what CIMB says come true. Recently, CIMB Research has given Eco World an “add” call and an implied target price of RM8 , saying that the recently announced acquisition of landbank worth RM3.8bil as the main reason for this re-rating. CIMB Research also said that Eco World is their top picks in the property sector. On 5th May, CIMB Research said their top pick was Mah Sing. 🙂   RHB Research’s top picks are Sunway and IJM Land. Maybank KE Research’s top pick is Glomac.  Do you see a relevance now? Yes, the relevance of all these top picks meant that there’s no relevance. Every analyst has their own way of analysing the company and thus the results are different.

ecoworldHow about My pick remain same, first choice is buying the actual property itself. Second choice, safer and still twice or slightly more than twice would be REITs. Nevertheless, I think Eco World does have emotional appeal this time due to all of the attention that it has been getting. In fact just recently, they took up another four pages in newspaper to tell everyone about their projects. As much as stocks analysis are number based, the stock prices are many times, emotional based. Look at the PER for some traditional stocks, it’s normally much higher than PER for a newer or less renowned stocks. So, don’t tell me it is based on just numbers. I don’t believe so.

Last but not least, always remember that ECO World is now the new ‘SP Setia’, from the top management down to the managers, many if not majority were from Malaysia’s most high profiled developer thus far, SP Setia. All these mean a lot because in the property market, the right branding sells at a premium which allows the company to offer better quality (actually you are paying for it). Right branding also help in stock price even if your profits are still not enough to justify such a high share price. Look at all the giant online firms in USA and you would see why. For example, Facebook. No huge profits but share price meant that its price is now, based on a forward PE until end of 2015 of 34 times! If you know about stocks, here in Malaysia, not many have such PER. Cheers.

written on 24May 2014

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