MARC Ratings has affirmed its rating of AA-IS(cg) on Eco World Capital Berhad’s RM3.0 billion Islamic Medium-Term Notes (Sukuk Wakalah) Programme. Concurrently, MARC Ratings has assigned a preliminary rating of AIS(cg) to Eco World Perpetual Capital Berhad’s proposed RM2.0 billion Perpetual Sukuk Wakalah (Perpetual Sukuk) Programme. All ratings carry a stable outlook. Eco World Capital and Eco World Perpetual Capital serve as financing vehicles of parent Eco World Development Group Berhad (EcoWorld) which has provided a guarantee on the Sukuk Wakalah Programme and a subordinated guarantee on the Perpetual Sukuk. Both guarantees are unconditional and irrevocable. The two-notch differential between the Perpetual Sukuk and Sukuk Wakalah reflects the subordination of the former to EcoWorld’s senior unsecured obligations and the risk of deferred profit distributions, in line with MARC Ratings’ methodology on subordinated and hybrid instruments.
EcoWorld’s well-established market position in property development, characterised by a strong sales track record, and sizeable unbilled sales from significant ongoing projects are key rating drivers. These factors are counterbalanced by the potential increase in leverage position due to higher borrowings as well as execution risks stemming from a realignment of business focus to increase recurring income streams.
EcoWorld registered an average take-up rate of 90%. Its ongoing projects had a gross development value (GDV) of RM10.3 billion as at end of financial year ended 31 October 2024 (FY2024). This has translated into significant unbilled sales of RM4.0 billion, providing healthy earnings visibility over the medium term. The rating agency continues to view that the group’s strong sales performance is underpinned by the “EcoWorld” brand which is associated with well-designed projects with good accessibility and recreational amenities. Comprising landed and high-rise developments, commercial projects and industrial parks, the development projects are generally located in the Klang Valley, Johor, and Penang, where demand has been more resilient.
EcoWorld has undertaken a strategy to further enhance its recurring income segment to account for 20% to 30% of group earnings over the next three to five years. While MARC Ratings views the strategy positively, EcoWorld remains exposed to execution risk in the near term. Among its key initiatives is a 20-year build-and-lease agreement with Pearl Computing Malaysia Sdn Bhd, which EcoWorld signed in February 2025 with a total rent value of up to RM4.8 billion. There is an option to renew the lease by up to 10 years post the initial 20-year term. EcoWorld will develop and lease the shell and core of the data centre on a 92.44-acre land parcel in Eco Business Park V, Selangor. This is expected to be completed by end-FY2027. The group has also sold 58.2 acres of land within the same business park to Pearl Computing Malaysia Sdn Bhd for RM266.1 million for the latter’s proposed development of a data centre.
In a separate development, EcoWorld has signed a share subscription agreement with SD Guthrie Berhad and Negeri Sembilan state agency, NS Corporation, to develop a 1,195-acre industrial land in Negeri Sembilan into Eco Business Park VII. The project is expected to generate a GDV of RM2.9 billion over a duration of nine years. EcoWorld’s equity contribution in the joint venture is expected to be funded by a mixture of drawdowns from the programmes and internally generated funds.
Borrowings are anticipated to increase in 1HFY2025, driven by recent issuances under the Sukuk Wakalah Programme and the full consolidation of Paragon Pinnacle Sdn Bhd (PPSB). The consolidation arises from the acquisition of the remaining 40% equity from the Employees Provident Fund (EPF) in February 2025, following a put option exercised by EPF. PPSB is the developer of Eco Grandeur and Eco Business Park V. The concern on the increase in leverage is mitigated by the group’s stated aim to pare down its borrowings over the years from internally generated funds. Additionally, the issuance under the perpetual programme would add liquidity source to the group once it is established. In this regard, the rating agency notes that EcoWorld had a strong cash flow (CFO) generation of RM1.0 billion in FY2024. In 1QFY2025, CFO stood at RM159.8 million with healthy cash balances of RM1.3 billion. MARC Ratings notes that the group had initiated the sale of several land parcels totalling RM1.7 billion between June 2024 and March 2025. These sales are expected to be completed in FY2025 and FY2026, of which the net proceeds will strengthen its liquidity position going forward.
For 1QFY2025, revenue remained stable at RM539.6 million (1QFY2024: RM537.8 million), supported by recognition from ongoing as well as newly launched phases. The operating profit margin was higher at 22.0% (1QFY2024: 20.1%) due to higher profit margins achieved by ongoing phases as well as realisation of cost savings for completed phases of its developments.