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Hello fellow investors and market watchers!
Today, we’re diving deep into the latest financial performance of EASTERN & ORIENTAL BERHAD (E&O), a prominent name in Malaysia’s property and hospitality sectors. Their financial report for the fourth quarter and full financial year ended March 31, 2025, has just landed, and it paints a picture of robust growth, primarily driven by their property segment, while also highlighting areas that warrant closer attention. The overall sentiment is one of significant recovery and strategic positioning for future opportunities.
Let’s unpack the numbers and see what’s truly shaping E&O’s trajectory.
E&O’s Financial Year 2025: A Snapshot of Growth
E&O has delivered an impressive performance for the financial year ended March 31, 2025. The company demonstrated strong top-line and bottom-line growth, signaling a positive momentum across its operations.
Full Financial Year Performance (FY2025 vs FY2024)
- Revenue: Soared by 75.3% to RM741.1 million, significantly up from RM422.8 million in the previous financial year. This surge was primarily propelled by the properties segment.
- Profit Before Tax: Increased by 29.5% to RM216.6 million, compared to RM167.2 million last year. This improvement reflects higher revenue recognition from development projects, though it was partially offset by an unrealised foreign exchange loss.
- Net Profit: Rose to RM181.7 million, a substantial increase from RM141.1 million in the prior year, marking a 28.8% growth.
- Basic Earnings Per Share (EPS): Stood at 7.64 sen, a slight decrease from 7.71 sen in the previous year. This marginal dip in basic EPS, despite the strong net profit growth, can be attributed to the significant increase in the weighted average number of ordinary shares in issue, primarily due to the conversion of Irredeemable Convertible Unsecured Loan Stocks (ICULS) during the year.
Looking at the latest quarter, the company maintained its upward trajectory:
Current Quarter Ended 31 March 2025
Revenue: RM236.7 million
Profit Before Tax: RM72.1 million
Basic EPS: 2.81 sen
Comparative Quarter Ended 31 March 2024
Revenue: RM121.3 million
Profit Before Tax: RM48.3 million
Basic EPS: 1.87 sen
The higher revenue in the current quarter was mainly due to the disposal of a property in the UK, contributing to the overall impressive quarterly performance. The increase in profit before tax was further supported by fair value gains on investment properties and the reversal of unrealised foreign exchange loss.
Diving Deeper: Segmental Performance
E&O’s diverse business segments have each played a role in the company’s overall performance:
Properties Segment: The Growth Engine
The properties segment was the star performer, recording a staggering 102.0% increase in revenue, reaching RM630.5 million for the financial year ended March 31, 2025, compared to RM312.1 million in the previous financial year. This significant growth was primarily driven by higher revenue recognition from ongoing projects and the strategic sale of a property in the UK. Joint venture projects, including Conlay, The Peak, and Avira Garden Terraces, also made substantial contributions, adding RM428.9 million in revenue.
Hospitality Segment: Steady Contributions
The hospitality segment recorded a slight decrease in revenue by 0.9% to RM104.4 million for the financial year ended March 31, 2025, from RM105.4 million in the previous financial year. Consequently, its operating profit saw a minor decline of RM3.8 million, mainly due to lower revenue and increased operating costs. Despite this, the segment remains resilient, contributing steadily to the group’s overall performance.
Investments and Others Segment: A Significant Turnaround
This segment demonstrated a remarkable turnaround, shifting from an operating loss of RM238.8 million in the previous financial year to an operating profit of RM11.7 million in the current financial year. This significant improvement is primarily due to the absence of large impairment charges on subsidiaries that were recorded in the previous financial year. It’s worth noting that this positive swing occurred despite an unrealised foreign exchange loss of RM29.2 million in the current financial year, compared to a gain of RM52.4 million in the previous corresponding financial year.
Financial Health and Cash Flow Dynamics
E&O’s balance sheet shows an increase in total assets, total liabilities, and total equity, reflecting expansion in its operations. Total assets grew to RM4.58 billion (from RM4.04 billion), while total liabilities increased to RM2.24 billion (from RM1.88 billion). Total equity also saw a healthy rise to RM2.34 billion (from RM2.16 billion).
However, the net assets per share attributable to owners of the parent decreased to RM0.93 from RM1.08. This is largely a result of the increased number of ordinary shares in issue following the conversion of ICULS, which expanded the share base significantly.
From a cash flow perspective, the company reported a net cash outflow from operating activities of RM335.2 million for the financial year, a notable increase from RM93.9 million in the previous year. This higher outflow was primarily driven by increased inventories and receivables, indicating significant investment in ongoing projects and sales. Total borrowings also increased to RM1.71 billion from RM1.46 billion, reflecting the funding needs for their development activities.
Future Prospects and Navigating Challenges
E&O’s outlook remains positive, buoyed by encouraging sales performance from recent property launches, attracting both local and international purchasers. The company is strategically preparing to launch four new residential and retail projects in Penang and Klang Valley, targeted for Q2/Q3 FY2026. These new developments are expected to sustain the growth momentum in the property segment.
In the hospitality sector, E&O anticipates continued growth in tourist arrivals and revenue. This optimism is supported by ongoing hotel refurbishment efforts, an increase in international direct flights, and the expanded Malaysia-China visa-free travel arrangement, all of which are expected to boost tourism.
However, like any business, E&O faces certain challenges. The increase in borrowings and the higher cash outflow from operating activities will require careful management. The fluctuations in foreign exchange rates also present a dynamic factor, as seen by the shift from an unrealised gain to a loss in the current year. The reduced fair value gain on investment properties compared to the previous year also highlights the changing dynamics of the investment property market. Furthermore, the general economic conditions and competitive landscape in the property development sector will continue to be significant factors influencing their performance.
Dividends: Returning Value to Shareholders
For the financial year ended March 31, 2025, the Board of Directors approved a special dividend of one (1) sen per ordinary share, which was paid on December 18, 2024, amounting to RM24.9 million. However, it is important to note that the Board did not recommend any final dividend for the financial year ended March 31, 2025.
Summary and
EASTERN & ORIENTAL BERHAD’s latest financial report showcases a strong recovery and growth trajectory, particularly within its core properties segment. The significant increase in revenue and profit before tax underscores the effectiveness of its ongoing projects and strategic asset disposals. The turnaround in the Investments and Others segment also highlights improved operational efficiency and the absence of prior year’s one-off impairments.
While the overall picture is encouraging, the increase in net cash used in operating activities and higher borrowings are key financial metrics that warrant continuous monitoring. The company’s proactive approach with new project launches and its anticipation of a rebound in the hospitality sector position it well for future growth. The strategic initiatives to capitalize on tourism recovery, combined with a robust pipeline of property developments, indicate a forward-looking management.
Key points to consider for the future include:
- The management of increased borrowings and the cash flow dynamics, especially the higher cash outflow from operating activities.
- The impact of foreign exchange rate fluctuations on overall profitability, as seen in the swing from a gain to a loss in the current year.
- The ability to maintain the momentum in property sales and successfully launch upcoming projects in competitive markets.
- The continued recovery and performance of the hospitality segment amidst evolving travel patterns and economic conditions.
E&O has clearly demonstrated its operational strength and strategic focus. The coming quarters will be crucial in observing how they manage their financial flows and execute their ambitious development plans. Their ability to navigate market challenges while leveraging their strengths will be key to sustaining this positive momentum.
What are your thoughts on E&O’s strategy to navigate these challenges and capitalize on future opportunities? Share your insights in the comments below!
