PETALING JAYA: Property developer Eastern & Oriental Bhd’s (E&O) three-year plan to double market capitalisation via higher sales target and net profits may be achievable via branding efforts and strategic tie-ups.
Hwang DBS Vickers Research analyst Yee Mei Hui noted that the company has a target of RM1.5bil to RM2bil worth of property launches per annum from financial year ending March 31, 2014 to financial 2016, with RM3bil to RM4bil of launches thereafter to achieve sustainable net profit of RM270mil to RM300mil from 2017 onwards.
“Existing strategies to increase its brand’s regional and international exposure, strategic partnership to scale up faster, development of new property growth engines and talent search will continue to be enhanced,” she said.
Yee also expects the developer to enlarge its landbank aggressively through possible collaboration with major shareholder Sime Darby Bhd by tapping on the latter’s landbank for large tracts in Kuala Lumpur, government redevelopment projects such as the Rubber Research Institute Malaysia land, landbanking exercises in Johor and overseas.
She noted that while such activities could raise E&O’s net gearing to as high as 100% from 35% currently, the net gearing could be managed via the developer’s joint ventures and potential equity fund-raising.
Meanwhile, RHB Research said: “Given the track record and quality, we will not discount the possibility of more collaboration with its existing partners such as Mitsui Fudosan (one of Japan’s largest property developers), Temasek (Singapore’s state-owned investment arm) and Sime Darby.”
PublicInvest Research analyst Tan Siang Hing said in another report that the management should not have any problems meeting the targets again given the company’s strategic and sizable landbank such as Seri Tanjung Pinang 2 in Penang and Kemensah Heights in the Klang Valley.
He said more clarity could come from Seri Tanjung Pinang 2, a critical factor in the company’s growth phase, in three to four months.
Results for its fourth quarter ended March 31 came in line with analysts’ expectations. HwangDBS Vickers Research and RHB Research maintained their “buy” calls on the stock pegging its target price at RM2.90 and RM3 respectively. On the other hand, PublicInvest Research downgraded it to “neutral” as the share price, which has jumped more than 30% recently, was reaching its target of RM2.20.
The stock was up 12 sen to close at RM2.20 with 4.6 million shares done.