Eastern & Oriental Bhd - Results Above Expectations
Thu, 28-May-2026 07:52 am
by Tan Wai Wern • Apex Research

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E&O (3417)

Target Price (RM)

0.96

Recommendation

Buy

  • E&O’s 4QFY26 CNP came in at RM76.3m (+41.0% YoY, -15.6% QoQ), bringing FY26 CNP to RM272.9m (+37.9% YoY), accounting for 108.3% of ours and 105.5% of consensus forecasts.

  • The Group’s outlook remains positive, supported by its RM1.7bn unbilled sales, which is expected to provide revenue visibility through FY29 as construction advances.

  • We maintain our BUY call with an unchanged TP of RM0.96, based on a 55% discount to our revised RNAV. 

     

Results Above Expectations. E&O’s 4QFY26 core net profit (CNP) came in at RM76.3m (+41.0% YoY; -15.6% QoQ) after adjusting for an unrealised foreign exchange loss of RM14.2m, bringing FY26 CNP to RM272.9m (+37.9% YoY). These results exceeded expectations, accounting for 108.3% of ours and 105.5% of consensus full-year estimates. The earnings beat was primarily driven by the Property segment, whose full-year operating profit (OP) surged +46.3% YoY. This outperformance was supported by stronger revenue recognition from ongoing projects, alongside maiden contributions from newly launched developments.

 

YoY/YTD. CNP surged +41.0% YoY / +37.9% YTD, underpinned by robust revenue recognition and healthy sales across existing projects. The momentum was largely driven by the Property segment’s OP, which increase to RM72.5m in 4QFY26 and RM279.5m in FY26 (+59.7% YoY; +46.3% YTD). Notably, the segment’s OP margin expanded by 1,329bps YoY / 678bps YTD to 35.1% and 37.1%, respectively, reflecting improved operational efficiencies. However, this was partly offset by higher finance cost, which increased +8.0% YoY to RM10.7m and +2.8% YTD to RM35.3m, in line with the Group’s net gearing ratio rising to 0.66x from 0.62x in FY25.

 

QoQ. CNP declined -15.6% QoQ, mainly due to a -17.4% contraction in the Property segment’s OP, with OP margins narrowing by 597bps. This was further compounded by a -67.6% fall in JV contributions to RM5.4m. Nevertheless, the decline was partially cushioned by a +33.6% increase in the Hospitality’s segment OP to RM9.0m, driven by higher occupancy rate at E&O Residences.

 

Outlook. The Group’s outlook remains positive, supported by stronger contributions from its Property segment. Earnings visibility is underpinned by steady construction progress and healthy sales momentum, with unbilled sales rising +16.5% QoQ to RM1.7bn, providing revenue visibility through FY29. Looking ahead, the Group plans to launch two additional residential projects in FY27 with a combined estimated GDV of RM1.0bn, which should support future growth. In addition, the Group is exploring potential commercial developments opportunities within Andaman Island alongside prospective partners to enhance the island’s amenities and cultivate an integrated living ecosystem for its estimated 25,000 future residents. While management remains mindful of rising building material costs, near-term exposure is limited as existing construction contracts are fixed-price in nature, shielding the Group from immediate cost escalation. Nevertheless, should logistics and material costs remain elevated over the longer term, we anticipate mild margin compression as the Group prioritises sustaining its RM1.0bn annual sales target.

 

Earnings Revision. We make no changes to our earnings forecast, as we expect the Group’s Property segment OP margin to normalise in the coming FY.

 

Valuation. We maintain our BUY call with an unchanged TP of RM0.96, based on a 55% discount to our unchanged RNAV.

 

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

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