INVESTMENT HIGHLIGHTS

• FY19 earnings within our expectation

• Lower full year earnings in FY19

• FY19 new sales at RM330.8m

• Earnings forecast maintained

• Maintain NEUTRAL with a revised TP of RM0.88

FY19 earnings within our expectation. Eastern & Oriental Berhad (E&O) FY19 core net income of RM78.7m came in within our expectation but below consensus’, making up 103% and 85% of respective full year estimates. E&O proposed first and final dividend of 3 sen per share for FY19.

Lower full year earnings in FY19. On sequential basis, 4QFY19 core net income jumped to RM42.2m from RM4m in 3QFY19 as earnings in previous quarter were dragged by provision of RM44.6m being the holding cost for option to purchase land which has lapsed. On yearly basis, 4QFY19 core net income was higher by 6.1%yoy, bringing full year earnings to RM78.7m (-25.2%yoy). The lower earnings in FY19 were attributed to lower contribution from property segment which was due to lower revenue recognition for reclaimed land in Seri Tanjung Pinang STP2A and lower sales of completed properties.

FY19 new sales at RM330.8m. E&O recorded new property sales of RM80m in 4QFY19, lower than new sales of RM100m in 3QFY19. That brought total new sales to RM330.8m in FY19. 63% of the total new sales in FY19 were contributed by projects in Penang, 25% contributed by projects in Klang Valley, 9% contributed by projects in Johor while the remaining was contributed by projects in UK. Meanwhile, unbilled sales stood at RM61.3m while unbilled land sale to KWAP stood at RM153.4m.

Maintain NEUTRAL with a revised TP of RM0.88. We maintain our earnings forecast for FY20 and introduce earnings forecast for FY21. We revise our TP for E&O to RM0.88 from RM0.95 as we update total number of shares in our RNAV valuation. Our valuation remains unchanged at 75% discount to RNAV. We maintain our Neutral recommendation on E&O as we continue to see neutral near-term prospect for E&O.

Source: MIDF Research - 27 May 2019