Eastern & Oriental Bhd - Results Above Expectations
Fri, 27-Feb-2026 08:33 am
by Tan Wai Wern • Apex Research

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E&O (3417)

Target Price (RM)

0.96

Recommendation

Buy

  • E&O’s 3QFY26 CNP came in at RM90.4m (+98.9% YoY, +48.8% QoQ), bringing 9MFY26 CNP to RM196.5m (+36.7% YoY), which accounts for 91% of our full-year forecast and 94% of consensus estimates.

  • Post results, we raise our earnings forecasts by +16.3%/+12.6%/+16.5% for FY26F/FY27F/FY28F as we impute higher margins assumptions on its Properties segment.

  • We maintain our BUY call with a higher TP of RM0.96 (from RM0.94), based on a 55% discount to our revised RNAV.

 

Results Above Expectations. 3QFY26 core net profit (CNP) came in at RM90.4m (+98.9% YoY, +48.8% QoQ) after adjusting for an unrealised foreign exchange loss of RM26.9m, bringing 9MFY26 CNP to RM196.5m (+36.7% YoY). These results significantly exceeded expectations, accounting for 91% of ours and 94% of consensus estimates. The earnings beat was anchored by the Properties segment, which saw operating profit (OP) surge +89.3% YoY and +41.6% QoQ. This outperformance was driven by accelerated revenue recognition and robust sales from ongoing projects (Fera, Senna and The Lume), complemented by maiden contributions from newly launched developments, Laman Embun and Avea.

 

YoY/YTD. CNP surged +98.9% YoY / +36.7% YTD, underpinned by robust revenue recognition and strong sales across existing projects, alongside new launches totalling c.RM900m in GDV this quarter. This momentum drove a significant +89.3% YoY / +42.1% YTD increase in the Properties segment’s OP. Notably, the segment’s OP margin expanded by 707bps YoY / 293bps YTD, reflecting improved operational efficiencies. This outperformance was slightly tempered by the Hospitality segment, which saw OP contract by -8.3% YoY / -8.9% YTD.

 

QoQ. CNP rose +48.8% QoQ, primarily driven by a +41.6% increase in the Properties segment OP. This growth was supported by a substantial 567bps expansion in OP margins. This sequential performance was further bolstered by a +35.7% uptick in the Hospitality segment, which benefitted from strengthening occupancy levels at E&O Residences.

 

Outlook. The Group’s outlook remains positive, underpinned by a dual-engine performance in property and hospitality. Earnings are well-supported by steady construction progress and robust sales take-up, with unbilled sales rising 9.9% QoQ to RM1,497.2m (from RM1,362.7m). This provides clear revenue visibility through FY29. The hospitality segment continues to demonstrate resilience, bolstered by elevated room rates and improved international connectivity, including the new Haikou to Penang direct flights. Strategic infrastructure catalysts, specifically the Gurney Bridge which opened in December 2025, have significantly enhanced Andaman Island's accessibility. This benefits both current and upcoming phases. Looking ahead, the Andaman Island 2 reclamation remains on track for completion by late CY2027, unlocking a massive RM40bn GDV potential. Coupled with management's appetite for strategic landbank acquisitions, these factors ensure a robust long-term growth runway.

 

Earnings Revision. Post results, we raise our earnings forecasts by +16.3%/+12.6%/+16.5% for FY26F/FY27F/FY28F as we impute higher margins assumptions on its Properties segment.

 

Valuation. We maintain our BUY call with a higher TP of RM0.96 (from RM0.94), based on a 55% discount to our revised RNAV.

 

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

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