• Maintain BUY and MYR1.38 TP, 47% upside with c.2% FY25F (Mar) yield. Eastern & Oriental’s 2QFY25 results continue to beat expectations. Earnings were largely driven by higher billings from existing projects as well as its newly launched project, The Lume. As earnings improved, the company also declared a special DPS of 1 sen for the quarter (prior to this, its last DPS of 1 sen was declared in FY19). Given its healthy pipeline of projects and steady sales, we expect EAST’s earnings growth to remain resilient.

• 2QFY25 results review. Revenue improved QoQ and YoY, as billings from ongoing projects such as The Meg, Arica as well as the Senna and Fera landed homes at Andaman Island continued to pick up. It also booked a maiden net profit contribution from The Lume – launched in July – during the quarter. Note: 1HFY24 headline PBT was impacted by an unrealised FX loss of MYR30.4m. Excluding the item, core earnings would have been MYR105m (vs MYR42.6m in 1HFY24). Net gearing rose slightly to 0.53x from 0.5x in 1QFY25, as borrowings were drawn down to fund the construction of Arica and The Meg.

• Stronger sales. 2QFY25 property sales totalled MYR215.1m vs MYR162.5m in 1QFY25. Of the total sales of MYR377.6m, The Lume accounted for MYR152.1m, followed by Senna and Fera (MYR100.3m), while The Peak and Conlay generated MYR62.9m and MYR39.7m in sales. Apart from The Lume, all the projects are fully or almost fully sold. The Lume, which features large units, is already 41% taken up. This is commendable – given its high absolute unit price point.

• Healthy pipeline of launches. Marina Apartments will be launched in early December. This project has a GDV of MYR634m, and features 524 units with sizes ranging 900-1,300sqf and an ASP of around MYR1,200psf. We believe the response to this project will similarly be encouraging, as it is the first sea- facing service apartment project on Andaman Island whereas the previous high-rise projects are not. Meanwhile, Senna and Fera Phases 3 and 4 (GDV: MYR306m) will be rolled out in May next year, and the first phase of Elmina landed homes is scheduled to be launched in 2QFY26.

• Forecasts. In view of the strong 1HFY25 results we raise FY25-27F earnings by 15%, 15% and 14%. Unbilled sales increased to MYR1.46bn, from MYR1.35bn as at 1QFY25.

• Valuation. Our TP is based on a 40% discount to RNAV, with a 2% ESG discount inked in – given our ESG score of 2.90 out of 4 for the company.

Source: RHB Securities Research - 27 Nov 2024