Eastern & Oriental (E&O) registered 2QYFY21 net profit of RM4.4m (+136.0% YoY, +234.8% QoQ), lifted primarily by foreign exchange (FX) gain of c.RM10m. Stripping-out, the FX gain, Group YTD net loss is estimated at RM8.8m, which is behind our and consensus full year net profit estimates in excess of RM20m. Group 2QFY21 revenue dropped 57% to RM58.9m, with all business segments delivering lower sales due to slower than expected progress billings and pandemic-related restrictions which adversely impacted its hotel occupancy. However, we keep our earnings unchanged for now as we expect 2HFY21 could be stronger driven by “The Peak” land disposal (revenue of RM88m), completion of land sale in STP2A (estimated 45.6% profit remaining and unbilled sales totaling RM126m. Maintain our Neutral call due to the lack of re-rating catalysts, and fair value of RM0.50 TP (at ~70% discount to RNAV, excluding STP2B&C).

• Weaker performance from all business segments. Its properties segment saw revenue halve to RM119.4m as restrictions during the MCO and CMCO periods slowed down work progress and affected sales of completed units. Its progress in STP2A is currently at completion rate of 54.4%, or just showing an increase of 0.9% since March 2020. Completed properties in STP1 also saw slower sales given the economic uncertainties. The worst hit was its hospitality segment which saw revenue dropping c.71% YoY to only RM8.5m due to the pandemic induced slowdown which hammered the tourism industry. YTD occupancy for its hospitality asset is just averaging 20.2% with operating loss widening to RM20.3m.
• Launches worth RM1bn in the pipeline. The Group is looking to launch 2 projects in 2HCY21 i.e. STP2A (maiden launch with RM650m GDV) and The Peak (JV with Mitsui Fudosan, RM348m GDV). As for the coming quarters, we expect the Group to see more billings from land disposal of The Peak (revenue of RM88m), completion of land sale to KWEST (45.6% remaining) and from unbilled sales totaling RM126m.

Source: PublicInvest Research - 1 Dec 2020