Investment Highlights

• We upgrade Eastern & Oriental (E&O) to a BUY (from HOLD) with a revised fair value of RM2.01 per share (from RM1.98 previously) (Exhibit 3).

• We raise our FY19 earnings by 67% to RM107.8mil while introducing FY20-21 earnings at RM108.8mil and RM111.8mil respectively.

• E&O has several ongoing key projects, namely Ariza Seafront Terraces @ STP1, Penang (landed residential, GDV RM90mil), the final tower of Andaman @ Quayside (high-rise residential), Penang (GDV RM600mil) and Avira Garden Terraces @ Iskandar Johor (landed residential, GDV RM100mil).

• For FY19, E&O expects to launch two projects at premium locations in KL namely Conlay Tower @ Jalan Conlay (high-rise residential, GDV RM880mil) and The Peak @ Damansara Heights (landed residential, GDV RM278mil).

• Meanwhile, E&O‘s unbilled sales of RM480.7mil will be progressively recognized over FY19 and FY20.

• The key highlight for E&O is the much anticipated STP2 @ Penang Island, a masterplan which will be phased over 15- 20 years featuring waterfront promenade areas, park-andride facilities, leisure and cultural facilities, a waterfront square lined with F&B outlets as well as a network of green spaces.

• STP2, located in the waters to the east of the first phase covering an area of 760 acres, will be divided into three phases namely STP Phase 2A, Phase 2B and Phase 2C. The first phase (253 acres) of reclamation works for STP2 is expected to be completed by early 2019.

• STP2A is expected to have a GDV of over RM17bil, which will take over 15 years to complete. The initial phase STP2A is targeted to be launched in 1QCY19, with a GDV of about RM380mil (net saleable area 350K sq ft.), comprising 400 units of serviced apartments (600-1,200 sq ft @ about RM850 per sq ft.) and 16-20 retail lots.

• We expect STP2 to be a strong seller given its attractive seafront living concept, building on a reclaimed island strategically located across the waters to the east of Gurney Drive and STP1. On top of that, STP2 is adopting urban design guidelines to create a living environment that respects the heritage of Penang.

Source: AmInvest Research - 17 Aug 2018