Eastern & Oriental’s 4QFY14 results came in above expectations.  FY14 new  sales  hit  MYR730m,  and  FY15  sales  are  expected to  reach  about MYR1bn.  Thus  far,  London  Princes  House  is  almost  fully  sold,  and Avira terraces are already 70% booked. We continue to like the stock, and the expected  masterplan endorsement by the State Government in June/July should be the next share price catalyst. Maintain BUY.

• Above expectations.  Eastern & Oriental (E&O)’s 4QFY14 results came in  slightly  above  our  and  market  expectations.  Headline  net  profit  was lifted  by  MYR10m  revaluation  surplus  for  Dua  Annexe.  Excluding  the impact,  its  core  earnings  were  considered  strong,  as  E&O  focused  on the  construction  progress  of  its  ongoing  projects  so  that  its  progress billings  were  on  track.  A  3  sen  single-tier  dividend  was  declared  for FY14, comparable to last year’s 4.5 sen taxable gross dividend.
• MYR730m  sales  in  FY14.  E&O  achieved  new  sales  of  MYR730m  (vs MYR570m  in  9MFY14  and  MYR530m  in  FY13).  This  was  mainly contributed  by  The  Mews  and  Andaman  Quayside.  Going  into  FY15, E&O  aims  to  achieve  a  sales  target  of  MYR1.2bn,  out  of  which MYR280m is expected to come from London, MYR380m from Andaman Block 3, MYR480m from Avira Medini and MYR60m from the release of bumi-units of The Mews. While it appears bullish, we believe some sales may  flow  into  FY16,  and  hence  management’s  MYR450m  combined headline  net  profit  target  for  FY14-16  can  still  be  achieved.  Thus  far, London Princes House is almost fully sold, and the first batch of terraces in Avira is 70% booked. We believe the second batch can be rolled out towards late 2014, as necessary approvals have already been obtained.
• Forecasts.  We  raise  our  FY15  earnings  forecast  by  12%  as  the construction  works  for  The  Mews  pick  up,  while  progress  billings  for Andaman  1&2  continue  to  kick  in.  Our  new  FY16  forecast  is  mainly underpinned by the expected completion of London Princes House.
• Maintain BUY. We maintain our BUY rating and MYR3.12 FV, based on 25%  discount  to  RNAV.  On  21  April,  the  company  has  submitted  Seri Tanjung Pinang 2 (STP2) land use masterplan to the State Government for  endorsement.  We  expect  the  final  green  light  to  be  granted  in June/July,  as  guided  also  by the  management,  and  this  should  be  the next share price catalyst.

Source: RHB