- We reaffirm our BUY recommendation on Eastern and Oriental (E&O) with an unchanged fair value of RM3.00/share – a 35% discount to our NAV of RM4.61/share, including the significant accretion from Seri Tanjung Pinang 2 (STP2). Stripping off STP2, our NAV stands at RM1.36/share.

- We remained upbeat following our company visit to seek updates on the final stages of the crystallisation of STP2.

- STP2 remains as the key catalyst for E&O given the potential tripling of NAV and deep development potential of the 760-acre prime land located opposite the highly successful STP1.

- E&O is on track to obtain approval from the Penang state government in 2QCY14 for the commencement of reclamation works on STP2, which we expect to begin in 2HCY14.

- To recap, an approval-in-principal was obtained from the state government in April 2011 for STP2. This is pending the DOE’s (Department of Environment) approval for the DEIA (Detailed Environment Impact Assessment) study.

- E&O is currently conducting a last round for the public to submit feedback on the DEIA study; the cut-off date is 27 March. Assuming no hiccups, this would mark the final step to obtain DOE’s approval on the DEIA study. An expert panel review (first round) and site visit were recently held by DOE.

- The launch of STP2 could happen earliest in end-2016, two years after the commencement of reclamation.

- We are positive that STP2 will do well, underpinned by scarcity of land, the firm establishment of STP1, and improved accessibility (i.e. second Penang bridge and Penang undersea tunnel).

- Launches of E&O’s key prolific projects are on track. The balloting for Avira Wellness (Phase 1: 208 terrace units) is earmarked to happen in April, with indicative prices of >RM600psf (fully-fitted units). We expect strong demand considering:- (i) that these are the first landed homes in Medini; (ii) the rising relocation of Singaporeans to Johor; and (iii) its close proximity to Pinewood Studio.

- In line with our expectations of a strong reception to London Princess House given its strategic location, the project had achieved a 70% take-up rate for its residential units. The group is in talks to sell the remaining 34 units of serviced apartments en-bloc to institutional buyers.

Source: AmeSecurities