Eupe Corporation Berhad (EUPE, 6815) is primarily engaged in property development, construction, property investment, and hospitality services. Founded in 1986, the company’s initial township development was in Kedah, Malaysia, and has since expanded its portfolio to include high-quality residential developments, particularly in the Northern Region and Kuala Lumpur. Outlook for EUPE is highly positive, driven by its robust project pipeline, which has a total GDV of RM3.1bn and unbilled sales of RM717m as of 1QFY2/25. With several projects in hand showing favourable take-up rates, we expect EUPE to register net earnings of RM40.8m and RM46.4m for FY2/25 and FY2/26. BUY with a target price of RM2.02, based on a PER of 8x. We are prudent in our valuations due to the company's conservative approach in securing land bank. EUPE maintains a healthy net gearing ratio of 0.26x as of 1QFY2/25 with a strong interest coverage ratio of 20x, reflecting its strong financial management and ability to leverage its balance sheet effectively while maintaining financial stability.

Currently, EUPE is involved in several significant projects. One of its flagship developments is Est8 @ Seputeh, a twin-block, 41-floor project located near Mid Valley Mall with a GDV of RM653m. This project is progressing well, with 48% of the construction completed and 97% of the units sold, reflecting strong market demand. Another major project is Helix2 @ PJ South, which features a twin 33-storey towers with a GDV of RM240.2m. Helix2 is also showing excellent progress, with 50% of the project completed and 95% of the units sold. Additionally, the company is developing Villa Natura in Sungai Petani, a residential project that was launched in multiple phases, of which have seen strong sales. This project, comprising of over 700 homes are designed for young buyers and continues to be a significant contributor to EUPE's earnings portfolio.

Looking ahead, EUPE has an exciting lineup of new projects that will further strengthen its position in the market. One of the most anticipated is Circadia @ Belfield in Kuala Lumpur, a major development with an estimated GDV of RM1.2bn, scheduled for launching in 2025. Another key project is Edgewater, which is set to be the largest development in the Northern Region with a GDV of over RM700m. This project is expected to be launched in 2HCY24. EUPE recently acquired a 2.46-acre land parcel in Bangsar, where it plans to develop a high-impact project, further enhancing its portfolio within the prime vicinity.

We believe outlook for EUPE is highly exciting, driven by its robust project pipeline, which has a total GDV of RM3.1bn. Given the available banking facilities and cash reserves, we estimate EUPE has the capacity to handle a total GDV of over RM6bn, including both current projects and future developments, providing earnings visibility for the next 5-7 years.

Source: Rakuten Research - 30 Aug 2024

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