4QFY15 results came in below expectations, while headline numbers were skewed by one-off gains. Maintain NEUTRAL with a lower TP of MYR2.02 (10% upside), after we fine-tune our assumptions and update our RNAV estimate. New sales achieved MYR940m as contribution from the UK got larger at 21%. Meanwhile, the award of tender for the reclamation works at STP2 should come in June/July.

• Below expectations. Eastern & Oriental’s (E&O) 4QFY15 (Mar) core earnings came in below our and market expectations. Headline net profit was lifted by MYR100.5m, which was made up of a MYR56.2m gain from the disposal of a 49%stake in the Conlay project, and a MYR44.3m re-measurement gain for the remaining 51% equity interest. A 3.8 sen final dividend was declared, and it will be paid out via the distribution of E&O’s treasury shares.
• MYR940m new sales in FY15. New sales surged by MYR468m in 4Q, from MYR179m in 3QFY15, bringing full-year sales to MYR940m(MYR730m sales in FY14). The jump in 4Q was mainly due to the contract sales from the 20-unit apartments in Princes House London, as well as the sale of a shophouse worth MYR33m in Charlotte St. London. Contribution from Johor (Avira terraces) made up MYR263m or 28% of the total, while the Klang Valley accounted for 26% (Mews and Conlay’s disposal) and Penang at 25%. The bulk of the 90% bookings of Tamarind Tower A (GDV: MYR472m) will likely be converted into sales in 1HFY16 as the project was launched in late 4QFY15. Management has a sales target of MYR1bn-1.5bn for FY16, which seems to be a tall order, considering the challenging macroeconomic environment.
• Forecasts. We lower our FY16-17 earnings estimates by 9-14%. Net gearing rose to 60%, but is expected to fall to 30% after the listing of its London projects on the London Stock Exchange by year-end. Unbilled sales remained stable at MYR868m vs MYR901m in 3QFY15.
• Maintain NEUTRAL. Our TP is lowered to MYR2.02 (from MYR2.20), based on a 50% discount to our updated RNAV. Although the award of tender for the reclamation of Seri Tanjung Pinang 2 (STP2) – which may be announced in end-June/early July – could be a potential catalyst for the stock, the good news will likely be overshadowed by the weak sentiment in the property market, coupled with the recent equity market selldown.