Eastern & Oriental Bhd - Capturing Growth in the Premium Housing Market
Wed, 29-Oct-2025 08:02 am
by Research Team • Apex Research

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E&O (3417)

Target Price (RM)

0.93

Recommendation

Buy

·   E&O is poised to benefit from a long-term landbank with a potential GDV of c.RM65.4bn across 1,426.2 acres.

·   Core earnings growth will be driven by (i) recognition of unbilled sales of RM1.3bn, providing earnings visibility through FY29F, (ii) four new targeted launches in FY26F worth c.RM2.3bn, (iii) remaining projects in Andaman Island, Penang yet to be developed, with an estimated long-term GDV of c.RM56.0bn over 30 years, and (iv) the Group’s expertise in the premium residential segment.

·   We initiate coverage on E&O with a BUY recommendation and a target price of RM0.93, derived from a 55% discount to RNAV of RM5.2bn, incorporating a three-star ESG rating.

 

Key Investment Highlights

Specialist in Premium Housing: Less Cyclical Demand vs Affordable Housing. E&O is a specialist in the premium residential segment, with strong take-up rates and pricing power. At its flagship Andaman development, three of five projects (The Meg, Arica, Senna/Ferra Phases 1 & 2) achieved 100% sales. Its Kuala Lumpur project, The Conlay, commands ~RM2,400 psf versus ~RM1,700 psf for nearby serviced apartments, reflecting strong brand equity and resilient, less cyclical demand compared to affordable housing. E&O’s Penang developments on reclaimed land are largely exempt from affordable housing obligations, enabling the Group to focus on premium projects and maintain healthy margins and earnings visibility.

 

Prime Landbank in Penang: Strategic Positioning in a Growth Hub. E&O holds a 1,426-acre strategic landbank valued at RM17.1bn, providing long-term earnings visibility and flexibility to time project launches. Its Penang stronghold includes 735.9 acres for the remaining Andaman 1 and 2 phases, with an estimated GDV of RM56.0bn over 30 years and reclamation approximately 50% complete as of end-June 2025, with full completion targeted by end-CY2027. These scarce seafront parcels offer a clear competitive edge. Supported by Penang’s robust economy anchored in manufacturing, electronics, and services, and strengthened by FDI as the state cements its role as a semiconductor and E&E hub, E&O is well-positioned to benefit from sustained demand for premium housing and long-term growth in the region.

 

Robust Sales Performance. E&O’s emphasis on premium residential developments has translated into consistently strong market performance. Its booking to sales conversion rate stands at approximately 90%, well above the national average of 39% and the 60% typical for low to mid-range projects. This superior conversion rate reflects strong market confidence in E&O’s offerings and highlights the resilience of demand for its developments.

 

Diversified Revenue Stream. Its hospitality arm (E&O Hotel, The Lincoln Suites in London, and E&O Residences in Kuala Lumpur) together with its property investment assets, provides recurring income streams. These businesses contribute approximately 15% of total revenue, offering diversification benefits and supporting cash flow stability.

 

Financial Highlights. We project core net profit growth of 11%/6%/13% in FY26F/FY27F/FY28F, respectively. Growth will be driven by the progressive recognition of unbilled sales of RM1.3bn, an active landbank for Andaman Phase 1 & 2 with a remaining GDV of RM56.0bn providing earnings visibility until 2057, the upcoming Elmina development with a GDV of RM990m, and a strategic landbank with a market value of RM17.1bn potentially yielding ~RM65.4bn.

 

Valuation & Recommendation. We initiate coverage on Eastern & Oriental Berhad with a BUY recommendation and a target price of RM0.93, applying a 55% discount to our RNAV and supported by a three-star ESG rating.

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