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31 March 2015 | Corporate Update
Upgraded to NEUTRAL
Eastern & Oriental
Improved outlook with higher new property sales for FY15
Increased Target Price: RM2.05
(Previously RM1.88)
INVESTMENT HIGHLIGHTS
•
The launch of Tamarind Tower A (GDV: RM450m) have received a good
take up rate of 80%
RETURN STATS
•
Sales of 49% stake in Jalan Conlay land to Mitsui will boost FY15 Core Net
Income by RM48.8m
Price (27 Mar 2015)
RM2.01
E&O has formed a JV with Mitsui
Target Price
RM2.05
•
•
Improved new sales prospects for FY15 but FY16 likely to be flattish
•
Upgrade to NEUTRAL with a higher TP of RM2.05
The launch of Tamarind Tower A (GDV: RM450m) has received a good take rate of
80%. We recently met up with E&O and turned more positive on the Group’s new
property sales. Despite achieving only RM439m new sales in 9MFY15, the Group’s
aggressive launch in 4QFY15 is likely to increase the new sales level to RM940m in our
view. We gather that the Company has launched Tamarind Tower A in Feb-2015 with
GDV of RM450m and has achieved a good take up rate at 80% thus far. Tamarind
Tower A is the first block of the two towers of Tamarind executive apartment project
(Tamarind project) in Seri Tanjung Pinang (STP) to be launched. Overall, GDV for
Tamarind project is RM900m. Tower B with a GDV of RM450 will be launched in FY16.
We believe that the good take up rate is due to its attractive pricing which starts from
RM600,000 per unit. Tamarind project consists of 1104 units of executive apartments
featuring two blocks of 33 storeys each. Size of a typical unit with three bedrooms and
two bathrooms is around 1,042 sqft.
Sale of 49% stake in Jalan Conlay land to Mitsui will boost FY15 Core Net Income
by RM48.8m. Recently, E&O announced that it is has entered into a sale and purchase
agreement with Mitsui for the disposal of its 49% stake in Patsawan Properties Sdn.
Bhd. (Patsawan) for RM82.4m. Post disposal, E&O is expected to realize a one-off gain
of RM48.8m for FY15 but still retain control via the remaining 51% stake in Patsawan.
Out of the RM82.4m, RM53.9m will be paid to E&O and RM28.5m to be injected into
Patsawan. Patsawan owns a 5,812 square metre (or 62,560 sq feet) freehold land
located at the intersection of Jalan Kia Peng and Jalan Conlay, Kuala Lumpur. The deal
effectively values the land at RM3,250 per sqft.
Consequently, E&O has formed a JV with Mitsui to develop service apartments on
the land in Jalan Conlay. The plan is to develop 298 units of service apartments with
GDV of RM800m. Development is expected to start in 3Q2015 and target completion is
by 1Q2020. We are positive on the news due to the expected increase in FY15 Core
Net Income as well as potential new sales in the future from this project.
Improved new sales prospect for FY15 but FY16 likely to be flattish. We have
increased our new sales target to RM940m for FY15 in view of the good take up rate for
Tamarind project. Nevertheless, we think FY16 new sales should stay flat at RM932m (1%yoy against FY15) due to challenging outlook on the property sector in Malaysia. Our
assumptions for FY16 new sales include: i) RM360m from Tamarind Tower B (GDV:
RM450m, Take up: 80%), ii) RM330m from Esca House in UK (GDV: RM440m, Take
up: 75%), iii) RM107m from Princes House in UK (GDV: RM143m, Take up: 75%), and
iv) the balance RM135m from other projects launched previously (Tamarind Tower A
and 18 East Andaman). Tentatively, we think FY17E new sales should also stay flat at
between RM0.9b to RM1.0b as maiden property project from Seri Tanjung Pinang 2
reclamation land should be launched only in FY18.
Expected Share Price
Return
+2.2%
Expected Dividend Yield
+1.2%
Expected Total Return
+3.4%
STOCK INFO
KLCI
1,813.37
Bursa / Bloomberg
3417 /
EAST MK
Board / Sector
Main /
Properties
Syariah Compliant
Yes
Issued Shares (mil)
1,219.71
Par Value (RM)
Market Cap. (RM’m)
Price Over NA
1.00
2,451.62
1.64
52-wk Price Range
RM1.84 RM2.91
Beta (against KLCI)
1.18
3-mth Avg. Daily Vol.
2.54m
3-mth Avg. Daily Value
RM6.08m
Major Shareholders
Sime Darby Berhad
21.95%
Tham Ka Hon
10.90%
GKG Investment Holding
7.21%
Morning Crest Sdn. Bhd.
6.75%
KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES
MIDF EQUITY BEAT
Tuesday, 31 March 2015
Upgrade to NEUTRAL rating with a higher TP of RM2.05: We have increased our FY15 Core Net Profit to RM110m after
including the RM48.8m gain from the sale of 49% stake in Patsawan to Mitsui as well as increasing our new property sales
assumption. Our Target Price has been adjusted to RM2.05 (from RM1.88) based on unchanged discount of 60% to higher FD
RNAV of RM5.13 (from RM4.70). The higher FD RNAV is to reflect: i) the cash to be received from Mitsui, as well as ii) higher
Jalan Conlay project valuation based on its DCF, as the project will be implemented earlier than our previous expectation
coupled with an adjusted stake in the same project of 51% as compared to 100% previously. Accordingly, we upgrade our
recommendation on E&O to NEUTRAL (previously SELL). Overall, we have turned more optimistic on E&O’s long term
prospects due to its ability to secure good take up rate in Tamarind Tower A and the success in partnering Mitsui (reputable
developer from Japan). The contribution from Seri Tanjung Pinang 2 reclamation land is also good for long term prospect as it
should contribute to earnings from FY18 onwards. Nevertheless, the current challenging prospect surrounding Malaysia
property market leads us to believe that FY16 sales should stay flat on-year and this should limit the share price upside.
INVESTMENT STATISTICS
FYE Mar
FY12A
FY13A
FY14A
FY15F
FY16F
Revenue
Core EBIT
Core PBT
Net Income
Core Net Income
EPS (sen)
Core EPS (sen)
Net DPS (sen)
Net Dvd Yield
Core PER
NTA/share (RM)
P/NTA
Core ROE
Core ROA
492
171
175
128
131
11.55
11.86
3.19
1.4%
19.0
1.17
1.93
10.2%
6.0%
606
190
193
130
135
11.71
12.21
3.38
1.5%
18.4
1.26
1.79
9.7%
5.4%
497
197
172
113
118
10.24
10.70
3.00
1.3%
21.0
1.33
1.69
8.0%
4.8%
667
171
160
123
110
10.09
8.96
2.51
1.1%
25.1
1.44
1.57
7.0%
4.3%
958
220
195
133
133
10.85
10.85
3.04
1.3%
20.7
1.51
1.49
8.0%
5.0%
Source: Company, Forecast by MIDF Research
DAILY PRICE CHART
Kelvin Ong, CFA
Alan Lim, CFA
[email protected]
03-2173 8464
2
MIDF EQUITY BEAT
Tuesday, 31 March 2015
Landbank/Buildings
Location
Remaining
GDV (RM
m)
Methodology
Stake
Value (RM m)
Ongoing Projects
18 East Andaman
Seri Tanjung Pinang Phase 1,
Penang
Seri Tanjung Pinang Phase 1,
Penang
600
DCF @ WACC 10.2%
94%
The Mews
Kuala Lumpur
231
DCF @ WACC 10.2%
51%
43.0
Avira (Terraces)
Medini Iskandar, Johor
998
DCF @ WACC 10.2%
50%
182.2
Jalan Conlay
Kuala Lumpur
800
DCF @ WACC 10.2%
51%
141.8
Princes House
London, UK
330
DCF @ WACC 10.2%
100%
41.8
ESCA House
London, UK
440
DCF @ WACC 10.2%
100%
71.7
Hammersmith
London, UK
710
DCF @ WACC 10.2%
100%
115.5
Stake
Value (RM m)
The Tamarind Executive Homes
Other Landbank
900
DCF @ WACC 10.2%
94%
313.4
329.9
Price
(RM/sqft)
Size (ac)
Future reclamation land (Land
value less reclamation cost)
Seri Tanjung Pinang Phase 2,
Penang
760.0
33,105,600
154
78%
3976.6
Elmina West
Selangor
135.0
5,880,600
37
100%
217.3
Jalan Teruntung (The Peak)
Damansara Heights, KL
3.9
36,000
765
100%
27.5
Ukay Heights
Ulu Kelang, Selangor
9.4
409,464
33
100%
13.3
Kemensah Heights
Ulu Kelang, Selangor
309.5
13,481,820
41
100%
547.7
Gertak Sanggul
Penang
348.0
15,158,880
18
100%
272.9
Avira
Medini Iskandar, Johor
207.0
9,016,920
56
50%
252.5
Total Landbank Value
6547.2
Investment Properties
484.3
Fixed Assets
359.7
Cash
277.2
Cash from sale of stake to Mitsui
82.4
Total Liabilities (excl. deferred tax
liabilities)
-909.7
Total RNAV (RM m)
6841.0
No of shares (m)
1222.7
RNAV per share (RM)
Warrants, Exercise Price RM2.60
Fully Diluted No of shares (m)
5.59
222.3
1445.0
FD RNAV (RM)
5.13
Discount
60%
FD RNAV (RM)
2.05
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MIDF EQUITY BEAT
Tuesday, 31 March 2015
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
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distribution only under such circumstances as may be permitted by applicable law.
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implied, as to the accuracy, completeness or reliability of the information contained therein and it should
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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Negative total return is expected to be -15% over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
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