KEY INVESTMENT HIGHLIGHTS

• 1QFY21 earnings deemed within expectations

• Lower earnings from property development and hospitality segment

• 1QFY21 new sales at RM88.4m

• Earnings estimates maintained

• Maintain NEUTRAL with an unchanged TP of RM0.44

1QFY21 earnings deemed within expectations. Eastern & Oriental Berhad (E&O) 1QFY21 core net earnings of RM0.8m were deemed within expectations despite meeting only 3% of our and consensus full year estimates as we expect earnings in the coming quarters to recover gradually from adverse impact of Movement Control Order (MCO). Note that we have excluded forex loss in our core net income calculations.

Lower earnings from property development and hospitality segment. E&O recorded lower core net income of RM0.8m (-90.3%yoy) in 1QFY21 as the imposition of MCO hit its property development and hospitality segment. Operating profit of property development division shed -13.6%yoy as property sales were affected during MCO. Meanwhile, hospitality segment recorded operating loss of -RM14.4m in 1QFY21 due to weak hospitality demand. Looking forward, earnings are expected to recover in the coming quarters as construction works resumed. Nevertheless, we expect outlook for its hospitality segment to remain challenging due to Covid-19 pandemic.

1QFY21 new sales at RM88.4m. E&O registered lower new sales of RM88.4m in 1QFY21 as compared to new sales of RM135.2m in 4QFY20 as new sales were affected by MCO. New sales in 1QFY21 were mainly contributed by sale of Liew Weng Chee land for RM55m. Meanwhile, unbilled sales eased marginally to RM142.9m in 1QFY21 from RM150.2m in 4QFY20, providing earnings visibility of less than one year. Looking forward, new sales is expected to be driven by its ongoing project namely The Conlay (GDV: RM968m). Meanwhile, future launches in the pipeline include maiden launch of STP2A (GDV: RM650m) and The Peak (GDV: RM348m) which are expected to launch in 2HFY21.

Maintain NEUTRAL with an unchanged TP of RM0.44. We make no changes to our earnings forecasts for FY21/22F. We also maintain our TP for E&O at RM0.44, based on 87% discount to RNAV. We are maintaining our Neutral call on E&O as we see limited catalyst and unexciting outlook for its hospitality segment

Source: MIDF Research - 28 Aug 2020