Eastern & Oriental’s (E&O) 3QYFY21 net profit came in at RM0.8m (-95.6% YoY,-81.3% QoQ) primarily lifted by foreign exchange (FX) gain of ~RM14.2m. Stripping-out the FX gain during the quarter, Group YTD net loss is estimated at RM5.5m, which is still behind our and consensus full year net profit estimates in excess of RM20m. Group 3QFY21 revenue dropped by 57.6% YoY to RM165.5m due to adverse impact from the enforcement of the Conditional Movement Control Order (CMCO) within Malaysia in the last calendar quarter of 2020, as well as overseas travel restrictions which negatively impacted business activities especially its hospitality business. As such, we now expect the Group to register net loss of RM8.3m in FY21 (from RM21.6m net profit previously) after assuming slower billings from STP2A, higher losses from hospitality and the completion of “The Peak” land disposal (revenue of RM88m) now expected to only be in FY22, from 2HFY21 guided earlier due to slower than expected approval process due to MCO. Maintain our Neutral call due to the lack of re-rating catalysts, and fair value of RM0.50 TP (at ~70% discount to RNAV, excluding STP2B&C).

• Still challenging. 9MFY21 revenue from properties more than halved to RM150.8m (or -56% YoY) due to lower sales of completed properties and also slower billings from its reclamation land in STP2A of which current progress is only at 55.1% completion, a mere 1.6% increase from March 2020. Hospitality revenue collapsed 72% YoY to only RM13.2m due to pandemic-induced restrictions that severely impacted tourism activities which resulted in low occupancies in the E&O Hotel. YTD average occupancy is only 27.5% for E&O Hotel. As such, the hospitality segment losses widened to RM27.4m vis-à-vis RM6.4m loss a year ago.

• Launches worth RM1bn in the pipeline. The Group is looking to launch 2 projects in 2HCY21 i.e. STP2A (maiden launch with RM647m Gross Development Value (GDV)) and The Peak (JV with Mitsui Fudosan, RM348m GDV). As for the coming quarters, we expect the Group to see more billings from land disposal of The Peak (revenue of RM88m), completion of land sale to KWEST (44.9% remaining) and from unbilled sales totaling RM144m.

Source: PublicInvest Research - 24 Feb 2021