• Maintain BUY, with new TP of MYR1.08 from MYR0.88, 24% upside and c.2% FY25F (Mar) yield. Eastern & Oriental’s 3QFY24 results beat expectations. Property sales were higher than expected, reaching MYR604.6m for 9MFY24. We raise our FY24F-26F earnings in view of the successful launches. E&O is the best proxy for rising pent-up demand for premium property in Penang given its sizeable landbank on Penang Island, creating a township of its own. Our TP is now based on a lower discount to RNAV of 55% (from 60%).

• 3QFY24 results. Revenue was weaker QoQ as billings were slower, partly offset by stronger performance from the hospitality division, due to the seasonally spike in hotel occupancy. 9MFY24 headline PBT was lifted by the unrealised FX gain of MYR37.8m compared with the MYR26.7m unrealised FX loss for 9MFY23. Excluding the impact, net recurring PAT would be MYR65.7m vs MYR61.7m for 9MFY22. Net gearing inched up slightly to 0.5x vs 0.48x in the previous quarter.

• E&O may end FY24F with MYR750m sales. Property sales achieved MYR153.1m vs MYR182.3m in 2QFY24. Of the 9MFY24 total sales of MYR604.6m, Arica, which is almost fully sold, contributed MYR391.5m. The Peak and Avira contributed MYR68.8m and MYR83.8m. Meanwhile, sales at Conlay saw significant improvement, increasing by MYR27.3m to MYR54m during the quarter (50% take-up) as the company managed to attract foreign buyers after several marketing trips overseas.

• Successful launches in 4QFY24. In Jan 2024, E&O rolled out Phase 1 of Senna and Ferra, ie a 3-story semi-detached and terrace houses at Andaman Island. All the 36 units launched were taken up. The average unit pricing of MYR3.8m and MYR5m for the terraces and semi-detached units indicating strong buying power from the high income individuals in Penang. Phase 2 was recently launched during the Lunar New Year, and we expect good demand in view of the positive response for Phase 1. In the pipeline, a low-density luxury serviced apartment (GDV: MYR650m) will be rolled out in 1QFY25. Although the indicative ASP of MYR1,000-1,100psf is lower than the ASP for 18 East Andaman, being the last block at Seri Tanjung Pinang (STP) 1, this is part of management’s pricing strategy in view of its future launches in the area.

• Forecasts. Given the stronger-than-expected 9M results, we raise our FY24F-26F earnings by 12-30% to reflect the healthy property sales and profit margin. Unbilled sales rose slightly to MYR1.18bn vs MYR1.13bn as at 2QFY24.

• Valuation. Our TP is based on a 55% discount to RNAV, with a 2% ESG discount inked in given our ESG score of 2.90 for the company.

Source: RHB Research - 23 Feb 2024