Stock Focus Analyst optimistic on Eastern & Oriental despite weaker FY14

by **Cals** Tue 27 May 2014, 00:36

Stock Focus Analyst optimistic on Eastern & Oriental despite weaker FY14

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Monday, 26 May 2014 11:33

KUALA LUMPUR (May 26): Analysts are optimistic on Eastern & Oriental Bhd due to the property developer's high unbilled sales, and after taking into account imminent approval for its Seri Tanjung Pinang 2 (STP2) project in Penang.

The optimism is despite Eastern & Oriental reporting weaker numbers for financial year ended March 31, 2014 (FY14).

The property developer reported an FY14 net profit of RM113.43 million from RM129.56 million a year earlier on lower revenue recognition from current projects and delays for key projects.

It also proposed a first and final single–tier dividend of three sen for FY14.

Today, AllianceDBS Research Sdn Bhd analyst Quah He Wei said Eastern & Oriental's unbilled sales of RM900 million would underpin its near-term earnings visibility.

“Unbilled sales stand at RM900 million (2.4 times FY14 property revenue) as at Mar 14, which will underpin its near-term earnings visibility,” Quah said.

In addition, Quah said the property developer was currently waiting for the Penang’s government endorsement for the STP2 land.

“STP2 is well on track...We estimate that STP2 land bank valuation will comprise 36% (RM1.60 per share) of our realisable net asset value.

“Maintain "buy" and RM3.10 TP (target price) based on 30% discount to our RM4.40 realisable net asset value... We remain sanguine of its long-term prospects, underlined by its quality land bank (Medini and STP) and strong brand name,” said Quah.

At 10:50am, Eastern & Oriental shares rose one sen or 0.4% to RM2.33.

AmResearch Sdn Bhd maintained its “buy” rating on Eastern & Oriental shares with an unchanged fair value of RM3.90.

AmResearch analyst Tan Ee Zhio said Eastern & Oriental's FY14 new sales came to RM730 million.

“FY14 new sales are dominated by those in Penang (i.e. Quayside and Andaman Towers), making up 51% of total new sales in FY14. This is followed by developments in Klang Valley," Tan said.

Tan expects the STP2 approval to be granted to Eastern & Oriental within the third and fourth quarter of this year.