INVESTMENT HIGHLIGHTS

• Proposes to undertake 10% private placement

• Proposed to undertake rights issue with free detachable warrants

• Neutral on the fund-raising

• Earnings estimates unchanged

• Maintain Neutral with unchanged TP of RM1.22

Proposes to undertake private placement and rights issue. Eastern & Oriental Berhad (E&O) proposes to undertake a private placement of new ordinary shares of up to 10% of E&O’s existing issued share capital at an issue price to be determined later. E&O also proposes to undertake a renounceable rights issue of new E&O shares together with free detachable warrants at an issue price and basis to be determined later.

Neutral on the fund-raising. We are neutral on the fund raising as the share dilutive impact should mitigate by interest savings to E&O. Upon completion of the fund-raising exercises, enlarged share base of E&O is expected to increase by 51% to 1.98b shares. The proposed fund raising may potentially raise up to aggregate proceeds of approximately RM550m. E&O intends to utilise RM300m for property development and reclamation of STP while RM200m will be earmarked for repayment of borrowings. E&O is expected to enjoy interest savings of up to RM10.5m per annum upon partial repayment of the borrowings.

Earnings estimates unchanged. We maintain our FY19/FY20 earnings forecasts pending completion of the private placement and rights issue. The proposed private placement is expected to be completed by the first quarter of 2019 while the proposed rights issue with warrants is expected to be completed by the third quarter of 2019.

Maintain Neutral with unchanged TP of RM1.22. We maintain our Neutral call on E&O with unchanged target price of RM1.22, based on 68% discount to RNAV. We see neutral near-term prospect for E&O while maiden project launches on STP2A is expected to take place this year.

Source: MIDF Research - 12 Feb 2019