Eastern & Oriental Bhd - Results in Line, Strong Pipeline Supports Growth Outlook
Mon, 01-Dec-2025 07:59 am
by Team Coverage • Apex Research

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E&O (3417)

Target Price (RM)

0.94

Recommendation

Buy

  • E&O’s 2QFY26 CNP came in at RM60.8m (-0.7% YoY, +34% QoQ), bringing 6MFY26 CNP to RM106.1m (+8% YoY), accounting for 49% of our and consensus full-year forecasts.

  • We have modestly revised FY26F earnings by 0.1% to RM216.8m, while raising FY27F/FY28F by 6%/5% to RM242.1m/RM270.7m, reflecting higher revised GDV from new launches to our forecast.

  • Re-iterate our BUY recommendation with a slightly higher target price of RM0.94 (from RM0.93), based on a 55% discount to RNAV and incorporating a three-star ESG rating.

 

Results within expectations. Excluding the unrealised loss on foreign exchange (+RM10.5m), 2QFY26 core net profit (CNP) came in at RM60.8m. The results were within expectations, accounting for 49% of ours and consensus estimate of RM216.5m/RM215.0m.

 

YoY. CNP inched down 0.7% YoY, weighed by weaker hospitality operating profit (-23%; higher operating costs), higher tax expenses (recognition of deferred tax expense), lower JV contributions (-3%; Avira Garden Terraces was fully sold in the prior period. However, these were partly offset by stronger property operating profit (+32.5% on the back of stronger revenue recognition from ongoing projects such as Arica, The Lume and new launches Maris).

 

QoQ. CNP rose 34% QoQ, supported by stronger contributions from (i) operating profit from properties (+8%; in line with higher revenue (+12.7%) recognised from ongoing projects (Sena & Fera Phase 1 and 2), (ii) improved hospitality operating profit (+2.8%; higher average room rates and occupancy at the E&O Hotel), and (iii) joint ventures (+184.5%; primarily due to a low base in the prior quarter and improved profit recognition at the JV level). 

 

Outlook. The Group’s outlook remains positive, underpinned by strong property sales and resilient hospitality performance. Earnings remain supported as construction progresses and healthy sales take-up continues, with unbilled sales rising 1.6% QoQ to RM1,362.7m (from RM1,341.1m), expected to be gradually recognised through FY29. Hospitality remains resilient, aided by elevated room rates, strong occupancy, and improved air connectivity, including new direct flights from Haikou to Penang. FY26 launches totalling RM2,543m—including Senna & Fera Phase 3 & 4, Laman Embun, Seri Embun, and Avea—will support a steady earnings stream and strengthen the Group’s property portfolio. The opening of the Gurney Bridge in December 2025 is expected to enhance Andaman Island accessibility, benefiting both current and upcoming developments. Looking further ahead, the Andaman Island 2 reclamation remains on track for completion by end-CY2027, unlocking a potential GDV of RM40bn and providing strong long-term growth visibility. Management has also indicated the possibility of acquiring new landbank, which could further support the Group’s growth pipeline.

 

Earnings Revision. We raised FY26/27/28F earnings by 0.1%/6%/5% to RM216.8m/RM242.1m/RM270.7m, on higher revised GDV from upcoming launches of RM2.3bn (previously RM2.0bn).

 

Valuation. We maintain our BUY call with a higher TP of RM0.94 (from RM0.93), based on a 55% discount to our revised RNAV and incorporating a three-star ESG rating.

 

Risk. Affordability concerns amid premium positioning, SST exposure on construction services, and Syariah-compliant status risk.

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