gsg_stock discussion

Stockwatch- E&O Property (Malaysia) Citigroup initiate at Buy target RM1.80, currently RM1.40

E & O Property Development Bhd (EOPD.KL)
8 November 2006
Initiate at Buy with 39% ETR. Undervalued Quality Niche Developer

P/E-based target of RM1.80 — Our ENOP target price (based on 10x end-Mar 08E EPS) translates to an expected total return of 39%, the highest in our Malaysia property universe. Potential share price catalysts include earnings delivery and rising RNAV. ENOP's major shareholder is E&O Berhad, in which ENOP’s MD Dato’ Terry Tham and GK Goh Holdings have a stake.

Solid prospects and firm financials — Within our property coverage, ENOP has the strongest EPS growth outlook, at a 3-year CAGR of 24%, backed by RM299m unbilled sales. Financials are solid: FY07E net gearing of 61% and 8x interest cover. We see net gearing falling to 50% in FY08E and 36% in FY09E.

Leading position in growth markets — ENOP’s strategy is to focus on welllocated landbank and leverage off its track record and a strong brand image, which is partly built on innovative designs and lifestyle products. Projects are in excellent locations in Klang Valley and Penang.

Prime developments — The group has 1,701 acres of land in Klang Valley and Penang, which should easily sustain its development efforts over the next 10-15 years. Most of its landbank is in prime and established areas, which allows ENOP to benefit from spillover demand from these developments.

Attractive quantitative view — ENOP is in the Attractive quadrant of our quants screen, scoring well on both valuation and momentum.

posted by gsg @ 12:07 PM