Eastern & Oriental Berhad

Transcription

1 16 November 2017 Briefing Note Eastern & Oriental Berhad Reclamations work of STP2A is progressing well Maintain BUY Unchanged Target Price (TP): RM2.37 INVESTMENT HIGHLIGHTS Improved earnings in 1HFY18 Reclamations work of STP2A is progressing well Sales target at RM350m-RM380m Maintain BUY with unchanged TP of RM2.37 Improved earnings in 1HFY18. We attended results briefing of Eastern & Oriental Berhad (E&O) and came away feeling reaffirmed on the long-term prospect of STP2A. To recap, 2QFY18 core net income leaped by 246%yoy to RM15.7m from low base of RM4.5m in 2QFY17, bringing cumulative earnings in 1HFY18 to RM28.9m (+52%yoy). The higher earnings were contributed by earnings recognition from ongoing projects in STP and higher sales of completed projects. Reclamations work of STP2A is progressing well. Reclamations work of STP2A is 91% completed as at October CY2017. First batch of land titles is expected to be issued by end of CY2017. Upon issuance of land titles, E&O will be able to book in profit for the sale of land to KWAP in FY Meanwhile, E&O plans to develop six plots of land in STP2A for first phase of development. E&O plans to launch first residential project in STP2A in mid Recall that STP2A is a 253 acres of reclamations project with potential GDV of RM17b. Sales target at RM350m-RM380m. E&O is targeting to achieve new property sales of RM350m-RM380m in FY18, flattish against new sales of RM381m in FY17. Recall that E&O achieved new sales of RM149.7m in 1HFY18, mainly contributed by projects in Penang and UK. Looking ahead, E&O will remain focused in clearing its unsold inventory in STP and Klang Valley to drive its new sales in FY18. On upcoming project launches, Conlay Place (estimated GDV: RM900m) is expected to be launched in 4QCY2018. Note that Conlay Place is single tower design with 490 units of serviced apartments and residential units. Meanwhile, E&O plans to launch The Peak (low-rise development in Damansara Height) with estimated GDV of ~RM260m in 4QCY2018. Maintain BUY with unchanged TP of RM2.37. Post results briefing, we maintain our earnings forecasts for FY18/19F. Our TP is unchanged at RM2.37, based on 60% discount to RNAV. We are keeping our positive stance on E&O due to positive long-term prospect for STP2A. Profit recognition for KWAP land sale is expected to boost FY18/19 earnings. Besides, asset monetization of non-core assets will help to improve balance sheet. Net gearing stood at 0.59x in September 2017, which is close to its long term sustainable net gearing of 0.5x. RETURN STATS Price (15 November 2017) Target Price Expected Share Price Return RM1.47 RM % Expected Dividend Yield 1.7% Expected Total Return 62.9% STOCK INFO KLCI 1, Bursa / Bloomberg Board / Sector Syariah Compliant 3417 / EAST MK Main / Properties Yes Issued shares (mil) 1, Market cap. (RM m) 1,931 Price over NA wk price Range RM1.4-RM2.13 Beta (against KLCI) mth Avg Daily Vol 0.48m 3-mth Avg Daily Value Major Shareholders (%) RM0.74m Sime Darby Bhd 11.63% Paramount Spring SdnBhd 9.59% GKG Investment Holding 8.60% Lembaga Tabung Haji 7.39% KWAP 7.19% Morning Crest Sdn. Bhd. 6.41% MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK Kindly refer to the last page of this publication for important disclosures

2 INVESTMENT STATISTICS FYE Mar FY15A FY16A FY17A FY18F FY19F Revenue Core EBIT Core PBT Net Income Core Net Income EPS (sen) Core EPS (sen) Net DPS (sen) Net Dvd Yield 2.6% 1.4% 1.4% 1.7% 1.5% Core PER NTA/share (RM) P/NTA Core ROE 5.8% 1.2% 4.6% 4.5% 3.9% Core ROA 3.6% 0.5% 2.0% 2.0% 1.8% Source: Company, MIDF Research Estimate Figure 1: STP2A Site Reclamation Progress as at October 2017 Source: Company 2

3 E&O RNAV Landbank/Buildings Location Remaining GDV (RM m) Methodology Stake Value (RM m) Ongoing Projects The Tamarind Executive Homes 18 East Andaman Seri Tanjung Pinang Phase 1, Penang 900 WACC 10.2% 94% 95.6 Seri Tanjung Pinang Phase 1, Penang 600 WACC 10.2% 94% The Mews Kuala Lumpur 231 WACC 10.2% 51% 13.3 Avira (Terraces) Medini Iskandar, Johor 998 WACC 10.2% 50% 56.6 Jalan Conlay Kuala Lumpur 800 WACC 10.2% 51% 44.5 Princes House London, UK 330 WACC 10.2% 100% 28.8 ESCA House London, UK 440 WACC 10.2% 100% 49.4 Hammersmith London, UK 710 WACC 10.2% 100% 79.7 Other Landbank Future reclamation land (Land value less reclamation cost) Size (ac) Price (RM/sqft) Stake Value (RM m) Seri Tanjung Pinang Phase 2, Penang ,105, % Elmina West Selangor ,880, % Jalan Teruntung (The Peak) Damansara Heights, KL , % 27.5 Ukay Heights Ulu Kelang, Selangor , % 13.3 Kemensah Heights Ulu Kelang, Selangor ,481, % Gertak Sanggul Penang ,158, % Avira Medini Iskandar, Johor ,016, % Total Landbank Value Investment Properties Fixed Assets Cash Total Liabilities (excl. deferred tax liabilities) Total RNAV (RM m) No of shares (m) RNAV per share (RM) 5.81 Warrants, Exercise Price RM Placement RM Proceed from disposal of 20% stake in STP2A Fully Diluted No of shares (m) FD RNAV (RM) 5.92 Discount 60% FD RNAV (RM) 2.37 Source: MIDF Estimate 3

4 DAILY PRICE CHART Jessica Low Jze Tieng Source: Bloomberg 4

5 MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad ( X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL TRADING SELL Total return is expected to be >10% over the next 12 months. Stock price is expected to rise by >10% within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between -10% and +10% over the next 12 months. Total return is expected to be <-10% over the next 12 months. Stock price is expected to fall by >10% within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 5