Eastern & Oriental Bhd (Feb 19, 58.5 sen)
Maintain neutral with a lower target price of 57 sen: Eastern & Oriental Bhd’s (E&O) core net income for the cumulative nine months ended Dec 31, 2019 (9MFY20) of RM300,000 was below expectations — only 1% of our and consensus’ full-year estimates.
The weaker-than-expected earnings could be attributed to subdued earnings for the third quarter ended Dec 31, 2019 (3QFY20). E&O’s core net loss (CNL) for 3QFY20 was RM5.1 million after stripping a foreign exchange gain of RM23 million.
E&O remained in the red in 3QFY20, recording a CNL of RM5.1 million against a CNL of RM3.7 million for 2QFY20. Its 9MFY20 earnings were weak due to the absence of new launches to support earnings and as progress billings of development projects in Seri Tanjung Pinang Phase 1 (STP1) were low.
Besides, the hospitality segment was in the red, with an operating loss of RM6.4 million for 9MFY20 due to the closure of E&O Hotel’s heritage wing for refurbishment. The heritage wing was reopened in December 2019.
E&O’s new property sales were RM177.7 million in 3QFY20, higher than RM102.4 million in 2QFY20, bringing the cumulative new sales to RM359.6 million in 9MFY20. Penang contributed 67% of E&O’s total new sales, while the Klang Valley and Johor made up 28% and 5% respectively.
E&O’s unbilled sales increased to RM107.5 million in 3QFY20 from RM51.1 million in 2QFY20.
Meanwhile, E&O launched The Conlay, with a gross development value (GDV) of RM968 million, in the fourth quarter of 2019 (4Q19). The company targets to launch The Peak, with a GDV of RM348 million, in the second half of 2020 (2H20) and its maiden project in STP2A in 1Q21. — MIDF Research, Feb 19
This article first appeared in The Edge Financial Daily, on Feb 20, 2020.
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