• Maintain BUY and MYR1.38 TP, 64% upside with c.2% FY25F (Mar) yield. Eastern & Oriental’s 1QFY25 results beat expectations. Its property sales momentum has remained strong, as all Senna and Fera landed homes are now fully sold. The initial response to The Lume is encouraging, and the company plans to release its next marina serviced apartment project in 2HFY25. Pipeline launches should be on track to meet management’s MYR850m sales target. EAST remains the key Penang property play to capture rising demand, driven by strong investments in the E&E and semiconductor sectors.

• 1QFY25 results review. Revenue grew QoQ and YoY, mainly due to higher sales and billings from ongoing projects such as The Meg, Arica and the Senna and Fera landed homes at Andaman Island. Note that 1QFY24 headline PBT was lifted by a MYR25.7m unrealised FX gain (vs MYR0.4m in 1QFY25). The company’s net gearing remained at 0.5x.

• Decent sales in 1QFY25. 1QFY25 property sales totalled MYR162.5m vs MYR266m in 4QFY24. Of these, Senna and Fera homes accounted for MYR63.9m (the project was launched in 4QFY24), while The Peak and Conlay raked in MYR56.9m and MYR32.6m. The Peak is now almost fully sold, with just four units remaining. Senna & Fera is also fully sold, as the remaining two units will be kept as show units for future launches of landed homes.

• Encouraging response to The Lume. The strong response to the first batch of Senna and Fera landed houses is a good indication of the demand for high- end properties, given the ASP of MYR3.8m for a terrace unit and MYR5m for a semi-detached house. Over the last two months, EAST also had its soft launch for its low-density luxury serviced apartment project, The Lume (GDV: MYR689m), with an ASP of MYR1,100 psf and unit sizes of 1,722- 2,800 sqf. We gather that it was well received, as the booking rate was at almost 30% within three weeks. Buyers are currently signing sale and purchase agreements for their units there. In 2HFY25, another high-rise residential project – serviced apartment by a marina (GDV: MYR634m) will be rolled out. At a similar ASP psf, the unit size for this project would be smaller. We attributed the strong demand at Andaman Island to EAST’s ability to build a premium community on Penang island, given the flexibility it has with its sizeable landbank.

• Despite the strong 1QFY25 results, we maintain our forecasts for now. Unbilled sales for the quarter were at MYR1.35bn, unchanged from 4QFY24.

• 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 - 27 Aug 2024