Eco World Development Group Berhad (ECW) showcased promising growth in its new industrial revenue pillar, QUANTUM, as detailed in reports by Maybank Investment Bank (Maybank), Kenanga Investment Bank (Kenanga), and MIDF Amanah Investment Bank (MIDF). The initiative aimed to capture market share in the industrial segment, focusing on data centres, AI, cloud computing, high-tech manufacturing, and R&D. ECW rebranded its 404-acre industrial park in Kulai to Quantum Edge, securing Microsoft as its first anchor client.
Maybank reiterated its BUY rating on ECW, maintaining an earnings forecast and target price (TP) of RM1.96. Kenanga held an UNDERPERFORM stance with a TP of RM1.41, while MIDF maintained a NEUTRAL call but revised its TP to RM1.79 from RM1.63.
According to Maybank, the QUANTUM pillar was expected to strengthen ECW's high-tech segment's market strategy, ecosystem, and branding. The strategy remained focused on land sales and industrial properties, with potential asset ownership considered after evaluating balance sheet opportunities and returns. ECW's robust balance sheet, with a net gearing of 0.24x, and its ability to secure Microsoft, illustrated its management's capability.
Kenanga highlighted ECW's attempt to elevate its industrial products by rebranding them under the QUANTUM name, starting with Eco Business Park VI in Kulai. The presence of Microsoft added prestige, though the data centre did not bring a high-value supply chain. Kenanga noted that ECW's industrial products under the Eco Business Park brand had shown high growth, with a sales CAGR of 68% between FY20 and FY23. However, the bank did not foresee a significant earnings impact from the new initiative within the forecast period.
MIDF viewed the QUANTUM pillar as a positive medium-term development for ECW, expecting it to benefit from the growing demand for high-tech facilities in Malaysia. The Quantum Edge project, with Microsoft's involvement, was seen as a catalyst for future growth in the industrial property segment. Despite maintaining its earnings forecast, MIDF revised its TP upwards, citing improved earnings visibility for the industrial division.
ECW's new initiative aimed to accelerate the development of Eco Business Park VI, enhancing sales and margins. The presence of Microsoft, alongside potential future clients in the high-tech sector, positioned ECW favourably within the industrial market. The company's stable earnings outlook and active pursuit of new landbank opportunities, with a sales target of RM3.5 billion for FY24, underscored its strategic growth ambitions. Investment banks' varied ratings reflected differing perspectives on ECW's valuation and potential earnings impact from the QUANTUM pillar.