Bring on the Eastern Wind

MYOB did a sum of parts of Eastern Holdings a few weeks back. Today, EH announced a good set of results.


Boutique Property Developer, Eastern Holdings interim net profit surges 585% to S$13 million
- Revenue tripled to S$40.2 million on the back of Singapore property boom
- Property business contributed 75% of the total revenue
- Rewards shareholders with 1-for-2 bonus shares; to improve trading liquidity of the Group’s shares

"Over the years, Eastern Holdings has developed the reputation as an emerging boutique property developer. Looking forward, we will continue to concentrate on developing and investing in a good mix of commercial, residential and industrial properties in local and overseas markets. Barring unforeseen circumstances, the Group expects to do reasonably well in the next 12 months."

"The Proposed Bonus Issue is intended to reward shareholders for their loyalty to, and continuing support for, the Company. In addition, by increasing the number of shares in issue, we hope to improve the trading liquidity of the Group’s shares."

~ Mr. Tay Thian Boon, Stephen
Chairman, Eastern Holdings Limited


Singapore, 13 November 2007 – Eastern Holdings Limited, ("Eastern" or the "Group"), an emerging boutique property developer with a growing portfolio of residential, commercial and industrial properties, has announced its financial results for the six months ended 30 September 2007 (1H08). Net profit jumped 585% from S$1.9 million in 1H07 to S$13 million in 1H08. This is largely attributed to the increasing demand in the local property market.

The Group is also proposing a bonus issue of 100,000,000 new ordinary shares (the "Bonus Shares") in the capital of the Company. This will be on the basis of one (1) Bonus Share for every two (2) existing ordinary share in the capital of the Company held by the shareholders of the Company.

1H08 Financial Performance Review
The Group’s 1H08 revenue improved to S$40.3 million; a 254% jump compared to 1H07. The increase in revenue was the result of prominent sales from sold properties namely D’Evelyn, Walmer Drive, Brighton Crescent and Coronation Drive. Sales and rental of properties contributed 75% of the total revenue, up from last year’s 16%.

Eastern‘s net profit increased by 585% to approximately S$13 million for 1H08 as compared to S$1.9 million for 1H07.

Earnings per Ordinary Share for the year increased to 6.49 cents for 1H08 from 0.95 cents in the same corresponding period last year.

As at 30 September 2007, the Group has more than S$15 million in cash and cash equivalents.

Outlook & Future Plans

According to a local broking house’s report, the physical property market in the short to medium term, should still continue its growth momentum as the industry fundamentals are still robust. In addition, property developers have stronger cashflow from locked in presales over the past few years and are unlikely to lower selling prices to boost sales.

According to Urban Redevelopment Authority (URA) statistics, a total of 6.9 million sf of office GFA is likely to be completed between 2H07 and 2010 or an average 2 million sf a year. This compares with annual demand of 1.96 million sf and 10-year annual take up of 1.3 million sf. As such, in the short to medium term, demand of office space is likely to remain robust and will continue to strengthen office rents and capital values.

As Eastern embarks on the new developments of its two industrial and two residential projects, the Group believes that its property related business will continue to contribute substantially to the Group’s overall operations.

The Group has recently moved to divest selected media assets, which include the IT show, Computer Exhibition, the Food and Beverage Fair and the World Food Fair. The Group expects this transaction will have a material financial impact on the company if it is successful.

MYOB?
EH has enough cash on hand to give out 7.5 cents per share. This is before the divestment of the selected media assets listed above. Together with the management's commitment to inprove liquidity and to reward shareholders, the next few months could be interesting.

RAAAWWWRRRRR!!!

An old report from KE:

The lion's appetite for lime and steel

Since our last update, LAP has almost completed the disposal of itsmotorcycle businesses in China which were beginning to face declining profits. The company found a new focus in the production of quicklime -a purifying agent commonly used in steel manufacturing. LAP's limestone processing plant in Banting commenced trial production in Apr 07 with acapacity of 215k tpa, making it the single largest plant in Malaysia.

Possible plans for expansion include backward integration involving thepurchase of a quarry, which will give it better margins. Subsequently,LAP may also diversify into the production of high quality quicklime used in water treatment, as it offers more lucrative returns.

Volatile earnings for remaining businesses

Although subsidiary Advent Electronics expects FY07 revenue to outperform last year's $70m, bottomline profits will be lower thanFY06's due to higher provisions for inventory obsolescence. Given itscompetitive operating environment, margins for the business remains at~3-4%. In our view, the earnings trend will continue to fluctuate as itis largely dependent on the number of projects secured.

On the new automotive component trading unit, we see a possible slowdown in 2H earnings while LAP irons out technical issues involving the conversion of parts from left to right-hand drive to cater to the Malaysian market.

Anhui Auto stake is worth $0.325 per share LAP owns a 6.16% stake (66m shares) in Anhui Jianghuai Automobile Co.(AHJA), which is listed on the Shanghai bourse. At RMB10.02, this investment has a market value of S$132m ($0.325 per LAP share) or 145%of LAP's entire market cap; meaning that investors will be getting LAP'sother businesses for free.

We also view LAP as a cheap proxy to the booming Chinese automobile market. AHJA's 21x FY07 IBES consensus P/E compares favourably to its more expensive peers' 19x-75x.

Deep discount to SOTP value, Upgrade to BUY with $0.36 TP

Using SOTP valuation, we have included inter alia 1) marked-to-marketvalue of S$132m for its 6.16% stake in AHJA, 2) share of proceeds fromsale of Zhejiang Victor Motorcycle and 3) the group's strong net cash position of $39m. We also abscribed a conservative 5x P/E to our earnings forecasts for LAP's limestone, electronics and tradingbusinesses. After taking into account the dilutive effects of LAP'soutstanding warrants, we derive a fair value of $0.36. This gives acompelling 60% upside potential for a grossly undervalued stock which offers significant hidden value and indirect exposure to China's fast growing automotive sector.

Upgrade to BUY.

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MYOB:

At 26.5 cents, LAP's market cap = $107.5million
Huge amount of cash: S$62 million
Investment in AHJA: 79.38 million shares @ RMB8.5 = S$131 million
Limestone business

Make it your business? Yeah, in anticipation of a handout after divesting AHJA. The limestone business, the cash, and the electronic business are all free.

Business Update

Stocks closed up sharply following the latest interest-rate cuts by the Federal Reserve, ending the month of October on a strong note. For the month of October, the Dow Jones Industrial Average rose 0.25%. The Nasdaq rose 5.83% for the month, and the S&P 500 rose 1.48%. Note that the Volatility Index VIX remained high amid continued uncertainty over the effects of the credit crunch.

STI is near the all time high. HSI broke through the roof with the liquidity from China. MYOB remains slightly cautious at this point, possibly selling into strength.