E&O - 1-day non-deal roadshow (CIMB)

Although there were no major surprises from E&O’s roadshow to Singapore last Friday, the pains that management took to explain its new direction to investors were encouraging. Monday’s sale of the Tesco building in Penang for RM134m was a nice surprise that will take the company one step closer to its earnings targets. The net effect of the gains from the Tesco sale and a slight delay in the launch of the final three condo blocks in Penang is a 41% upgrade of FY12 net profit but earnings cuts of 6-9% for FY13-14. We raise our target price by 2 sen to RM1.98 as the Tesco sale increases our FD RNAV/share by 2 sen to RM2.82. We continue to rate E&O an OUTPERFORM as the stock could be catalysed by 1) the finalisation of approval for STP Phase 2 and 2) newfound management dynamism and lofty KPI targets.