Stock Name: E&O
Company Name: EASTERN & ORIENTAL BHD
Research House: CIMB
Eastern & Oriental Bhd
(May 31, RM1.49)
Maintain outperform at RM1.49 with revised target price of RM1.96 (from RM1.63): E&O's 3MFY11 net profit missed consensus by just 1% but was 10% above our forecast. However, this is nothing to shout about as it comes after two quarters of big shortfalls and significantly marked-down forecasts.
Still, we are encouraged by the pick-up in sales in Penang and the appointment of Eric Chan as deputy managing director. We now raise FY12/13 earnings per share by 2% to 45% for the stronger Penang sales and reduce the target discount to our RM2.80 revised fully-diluted realisable net asset value (previously RM2.72) from 40% to 30% given the likely positive news flow on Seri Tanjung Pinang (STP) Phase 2.
This raises our target price from RM1.63 to RM1.96. We maintain our 'outperform' rating as the share price could be catalysed by: (i) finalisation of approval for STP Phase 2; and (ii) newfound management dynamism and lofty targets.
E&O's 4Q results topped expectations and pushed FY11 net profit 10% past our forecast. Net profit for 4Q slumped 72% year-on-year but almost quadrupled quarter-on-quarter due to the pick-up in condo sales in Penang. Net profit for FY11 fell 56% on the back of a 23% decline in turnover.
The poorer full-year performance reflects significant pre-operating expenses for Lone Pine Hotel and Straits Quay Retail. The two sen final dividend was lower than last year's 3.8 sen but in line with our expectations.
The Quayside condos in Penang are finally selling fast and prices have appreciated significantly too. The first block, launched in early 2010, has achieved more than 80% take-up and more than 70% of the second and third blocks have been sold. Prices have risen from an average of RM740 psf for the first block to over RM900 psf.
The smaller units have seen faster price appreciation and have transacted at nearly RM1,200 psf. E&O will soon launch the fourth block at prices 5% to 10% higher than the third. So far, the group has sold RM700 million worth of condos and has RM1.3 billion more to go.
Chan was recently promoted from executive director to deputy managing director and will focus on the group's property development activities while major shareholder and managing director Datuk Terry Tham will focus on the hotel and leisure division.
We view Chan's appointment positively as he has set some ambitious earnings targets, 70% to 150% above our previous forecasts. The earnings growth will be driven both by organic growth and acquisitions or joint ventures. We also expect strategic tie-ups to materialise, particularly after approvals for STP 2 have been secured. ' CIMB Research, May 31
This article appeared in The Edge Financial Daily, June 1, 2011.
Company Name: EASTERN & ORIENTAL BHD
Research House: CIMB
Eastern & Oriental Bhd
(May 31, RM1.49)
Maintain outperform at RM1.49 with revised target price of RM1.96 (from RM1.63): E&O's 3MFY11 net profit missed consensus by just 1% but was 10% above our forecast. However, this is nothing to shout about as it comes after two quarters of big shortfalls and significantly marked-down forecasts.
Still, we are encouraged by the pick-up in sales in Penang and the appointment of Eric Chan as deputy managing director. We now raise FY12/13 earnings per share by 2% to 45% for the stronger Penang sales and reduce the target discount to our RM2.80 revised fully-diluted realisable net asset value (previously RM2.72) from 40% to 30% given the likely positive news flow on Seri Tanjung Pinang (STP) Phase 2.
This raises our target price from RM1.63 to RM1.96. We maintain our 'outperform' rating as the share price could be catalysed by: (i) finalisation of approval for STP Phase 2; and (ii) newfound management dynamism and lofty targets.
E&O's 4Q results topped expectations and pushed FY11 net profit 10% past our forecast. Net profit for 4Q slumped 72% year-on-year but almost quadrupled quarter-on-quarter due to the pick-up in condo sales in Penang. Net profit for FY11 fell 56% on the back of a 23% decline in turnover.
The poorer full-year performance reflects significant pre-operating expenses for Lone Pine Hotel and Straits Quay Retail. The two sen final dividend was lower than last year's 3.8 sen but in line with our expectations.
The Quayside condos in Penang are finally selling fast and prices have appreciated significantly too. The first block, launched in early 2010, has achieved more than 80% take-up and more than 70% of the second and third blocks have been sold. Prices have risen from an average of RM740 psf for the first block to over RM900 psf.
The smaller units have seen faster price appreciation and have transacted at nearly RM1,200 psf. E&O will soon launch the fourth block at prices 5% to 10% higher than the third. So far, the group has sold RM700 million worth of condos and has RM1.3 billion more to go.
Chan was recently promoted from executive director to deputy managing director and will focus on the group's property development activities while major shareholder and managing director Datuk Terry Tham will focus on the hotel and leisure division.
We view Chan's appointment positively as he has set some ambitious earnings targets, 70% to 150% above our previous forecasts. The earnings growth will be driven both by organic growth and acquisitions or joint ventures. We also expect strategic tie-ups to materialise, particularly after approvals for STP 2 have been secured. ' CIMB Research, May 31
This article appeared in The Edge Financial Daily, June 1, 2011.
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