Eco World's share split seen boosting trading liquidity



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KUALA LUMPUR: Eco World Development Group Bhd's share split exercise will be beneficial to the group and could help boost its stock liquidity, according to CIMB Research.

In a note today, the research house said it viewed the exercise positively, as the split would have no impact on the group's fundamentals.

"Investors should continue accumulating Eco World as the group is one of two developers that bucked the softening sales trend in 2014," it said.

"For Eco World's maiden year, the group chalked up RM3.2 billion in new sales, 60% above its target. This is very impressive considering that the sales came largely from only six projects - two in the Klang Valley and four in Johor," it added.

CIMB is maintaining its "add" call on the stock at RM1.93, with a target price of RM2.94.

To recap, Eco World's (fundamental: 0.95; valuation: 0.3) share price went ex for the 1-into-2 share split today, which reduces the par value of the stock to 50 sen and increases the paid-up share capital to 506.6 million shares.

The group also proposed a 1-for-2 rights issue with free warrants which is expected to go ex in mid-March, and a 20% share placement, targeted for 2Q15.

"The upcoming rights issue (targeted to raise RM788 million) and 20% private placement will help pare down gearing and strengthen the balance sheet of the group," said CIMB in its note.

"Upon the full completion of all the exercises, the paid-up capital of the group is expected to increase to 2.36 billion shares," it added.

Eco World's shares were trading 16 sen or 8.08% higher at RM2.14 as at 11.23 am, with 1.95 million shares done. The stock was among the top gainers across the bourse.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)