• Maintain BUY and MYR1.38 TP, 33% upside. Eastern & Oriental’s 4QFY24 (Mar) results beat expectations. Property sales continued to gain momentum, with MYR871m in total sales for FY24. In the pipeline, E&O plans to launch MYR1.3bn worth of new projects. With the burgeoning industrial activities driven by the expansion of the local E&E players in Penang, we believe the company will maintain its strong sales momentum at Andaman Island.

• 4QFY24 results. Revenue was stronger QoQ, largely due to higher progress billings from ongoing projects as well as strong sales from Senna and Fera landed homes at Andaman Island. FY24 headline PBT was lifted by a few exceptional items including unrealised FX gain of MYR52.4m, MYR40.2m FV gain on investment properties (mainly Straits Quay mall due to a new tenant that is taking up almost 20k sqf), partly offset by MYR59.2m impairment (largely due to development cost written down for Conlay which will be completed in Nov 2024). Excluding the impact, FY24 PATAMI would be MYR100.4m (vs MYR71.9m for FY23). Net gearing stayed at 0.5x.

• Better-than-expected property sales in 4QFY24. 4QFY24 property sales achieved MYR266m vs MYR153.1m in 3QFY24. Full-year sales amounted to MYR870.6m compared to MYR677m in FY23. Of the total sales in FY24, Arica contributed MYR414.6m, followed by Senna and Fera (MYR171.5m), The Peak (MYR118.9m; 6 units left out of 54 units) and Avira (MYR91.5m). The take-up rate for Conlay improved marginally, at around 50%. The project is slated for completion at the end of CY24.

• Expecting MYR850m sales for FY25F. E&O rolled out its maiden landed houses (3-storey semi-detached and terrace) Senna and Fera at Andaman Island in January-February this year. At an ASP of MYR3.8m for terrace and MYR5m for semi-detached, 63 units were sold out of a total of 69 units (GDV: MYR275m). In the pipeline, a low-density luxury serviced apartment, The Lume at Andaman Island (GDV: MYR689m) will be rolled out in July, and another high-rise residential project Marina apartment (GDV: MYR634m) will be launched in 2HFY25F. Although both projects have an indicative ASP of MYR1,000-1,100 psf, The Lume is targeted for family occupiers as its unit sizes are much larger (1,700-2,700 sqf). Both projects should be key sales drivers for FY25F.

• Forecasts. As construction works progress further, and given the healthy pipeline launches, we raise our FY25F-26F earnings by 14-15%. Unbilled sales increased to MYR1.35bn vs MYR1.18bn as at 3QFY24.

• Valuation. Our TP is based on a 40% discount to RNAV, with a 2% ESG discount inked in – given our ESG score of 2.90 for the company.

Source: RHB Research - 29 May 2024