Eastern & Oriental’s (E&O) 1QYFY21 net losses narrowed to RM3.3m, primarily dragged by forex losses of RM5.9m and provision for E&O Residences operations totaling RM5m. Stripping-out the one-off items, E&O would have registered RM7.4m net profit which is within our and consensus estimates at ~23% of full year estimates. Sales achieved in 1QFY21 was RM88.4m, mainly contributed by proceeds from land disposal totaling RM55m. Unbilled sales as at 1QFY21 stood at RM143m which will progressively be recognised over FY21–FY24. FY21 earning is adjusted downwards nonetheless by ~33% to account for the one-off items. We maintain our Neutral call and fair value of RM0.50 TP (at ~70% discount to RNAV, excluding STP2B&C) due to the lack of re-rating catalysts.

• 1QFY21 revenue dropped 47.9% to RM70.1m mainly due to lower sales from on-going development projects and inventory, lower revenue recognition on reclaimed land in STP2A and lower revenue from hospitality segment due to closure of E&O Hotel and E&O Residences during the Movement Control Order (MCO) period. Separately, the Group has decided to cease operation of E&O Residences given the pandemic induced slowdown which incurred RM5m provision during the quarter.

• Launches worth RM1bn in the pipeline. The Group is looking to launch 2 projects in 2HFY21 i.e. STP2A (maiden launch with RM650m GDV) and The Peak (JV with Mitsui Fudosan, RM348m GDV). As for the subsequent quarters, we expect the Group to see more billings from land disposal of The Peak (revenue of RM88m), completion of land sale to KWEST (46.2% remaining) and from unbilled sales totaling RM143m.

Source: PublicInvest Research - 28 Aug 2020