KUALA LUMPUR: Shares of Eco World International Bhd surged as much as 20.9 per cent in early trade today after the company announced it was ending a long-standing collaboration with Eco World Development Group Bhd (EcoWorld Malaysia).
At 10.30am, the stock jumped 4.5 sen to 26 sen with nearly 10 million shares traded. This brought its market capitalisation to RM516 million.
While the counter is down 3.7 per cent year-to-date, it has rallied 30 per cent over the past week.
EcoWorld Malaysia also edged up, gaining one sen or 0.53 per cent to RM1.89.
On Wednesday, Eco World International proposed to terminate a 2016 agreement with EcoWorld Malaysia that restricted both companies from operating in each other's markets.
Under the agreement, Eco World International was barred from undertaking property development in Malaysia, while EcoWorld Malaysia was limited to domestic projects unless carried out through the former.
The decision follows mounting challenges in Eco World International's key overseas markets, namely the United Kingdom and Australia.
The move would also see Eco World International change its name to EWI Capital Bhd.
Maybank Investment Bank Bhd (Maybank IB) said Eco World International's decision marks a strategic shift to re-enter the Malaysian property market which is more stable and visible compared to the UK and Australia.
"Backed by a strong balance sheet, Eco World International is well-positioned to pursue higher-margin projects locally and explore collaborations with EcoWorld Malaysia through co-developments or fee-based arrangements," said the firm.
Maybank IB added the move will also diversify Eco World International's income base and reduce earnings volatility from longer-gestation overseas projects.
The firm maintained its earnings forecast for the group and upgraded its call for the stock to 'Buy', with an unchanged target price (TP) of 27 sen.
Meanwhile the firm is neutral on the latest corporate exercise for EcoWorld Malaysia.
Although there are concerns over potential competition from EcoWorld International due to limited clarity on its future development focus, the firm said the impact is likely to be manageable.
"EcoWorld International may concentrate on pocket-sized projects that differ from EcoWorld Malaysia's core themes, offering market diversification rather than direct overlap.
"The move also opens the door for future collaborations between the two companies, where EcoWorld Malaysia could contribute its development expertise while leveraging Eco World International's strong balance sheet," it said in a separate note.
Maybank IB maintained a 'Buy' call on the stock with a TP of RM2.21.