Hot Stock E&O rises 5.8% on Elmina land buy, TP upgrades

by **Cals** Tue 08 Jul 2014, 08:51

Hot Stock E&O rises 5.8% on Elmina land buy, TP upgrades

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Monday, 07 July 2014 16:14

KUALA LUMPUR (July 7): Eastern & Oriental Bhd (E&O) rose as much as 5.8% after it entered into an agreement to buy a large tract of freehold land in Sungai Buloh from Sime Darby Bhd for RM239.8 million.

At 3.50 pm, E&O rose 14 sen or 5.1% to RM2.89 with some eight million shares done. The stock, which was earlier among the top gainers on the exchange, rose as much as 16 sen or 5.8% to RM2.91.

The 54 ha (135-acre) land is a part of the 2,000 ha (5,000-acre) City of Elmina in Sungai Buloh. The project is estimated to have a gross development value (GDV) of at least RM1.5 billion.

Under the agreement, E&O will pay 20% of the GDV to Sime Darby, if it exceeds the baseline GDV of RM1.5 billion. Sime Darby owns 32% of E&O.

Analysts have raised their target prices (TP) on E&O after the announcement, to impute the value of the land in its share price.

AllianceDBS Research Sdn Bhd raised its TP for E&O to RM3.80 from RM3.10 while maintaining its “buy” call on the stock.

AllianceDBS said Elmina West land had strong potential.

“While the first launch would only materialise by 2HCY16, at the earliest (master layout plan, land title conversion approvals to be secured in 21 months), we conservatively estimate the proposed development will enhance our RNAV by 18sen (3%),” said AllianceDBS in a note today.

Meanwhile, Public Investment Bank Bhd increased E&O’s TP to RM2.60 after accounting for the land deal, while maintaining its “neutral” call on the stock.

“We believe E&O is fairly valued for now, with the stock trading at more than 20x FY15 EPS currently,” said Public Investment.