Eastern Housing Ltd (EHL), a leading real estate company in the country, recorded a double-digit land sales growth of 14.4 per cent in FY23, despite total sales decreasing by 6.9 per cent.
The publicly traded company’s ongoing land projects, such as the third phase of the Jahurul Islam City and Mayakanan Lake City land developments, are poised to bolster its future revenue generation, EBL Securities, a leading stock broker, said in an equity report on the company.
EHL generates 75 per cent of revenue from its land sales, with apartment sales contributing to the remaining portion of the company's revenue stream.
The company is currently engaged in the construction of seven apartment projects, including a nearly finished luxury project in Gulshan, an upcoming luxury project in Dhanmondi, and a mega project with 261 apartments in Uttarkhan, Chalaban.
These are expected to significantly boost EHL's revenue from apartment sales upon completion of the projects, the EBL Securities report read.
EHL currently has 226 ongoing land cases, centring 250 acres of land with an estimated value of approximately Tk 1 billion. Notably, during FY23, eight of these cases were successfully resolved in EHL's favor.
Consequently, the favorable disposition of these cases is expected to exert a positive influence on the company's earnings in the coming period, the stock broker said.
The real estate company has increased its short-term investments as bank deposits in the form of FDR and Mudaraba Term Deposit Receipt (MTDR) by 49.8 per cent to Tk 5.02 billion in FY23, compared to Tk 3.35 billion in FY22.
This has resulted in a growth of 86.4 per cent in finance income to Tk 26.34 crore in FY23 from Tk 14.13 crore in FY22.
EBL Securities said in the study that the company’s earnings are likely to be positively impacted in the coming periods owing to the rise in deposit rates following the recent hike in policy rates and call money rates.
EHL has no interest-bearing bank loans, and the company has been financing its projects mostly from its internal sources of funds.
Currently, the only interest-bearing debt the company has is its finance lease obligation. Consequently, an increase in lending rates is unlikely to impact its profit margins, given the substantial reduction in its debt exposure.
Moreover, the Times Interest Earned ratio has improved from 3.9 times in FY19 to 150.4 times in FY23, the report read.
When most companies displayed a sluggish performance owing to the economic crisis both on domestic and global fronts, Eastern Housing posted a 25.30 per cent year-on-year profit growth in FY23.
The company logged Tk 68.80 crore in net profit in FY23, the highest over six years.
In FY22, the company’s net profit surged by 48 per cent to Tk 54.9 crore. The listed company’s revenue rose to Tk 331 crore in FY22 from Tk 264 crore in the previous fiscal year.
The listed firm’s earnings per share (EPS) stood at Tk 7.37 for FY23, compared to Tk 5.88 for the previous fiscal year.
Its net asset value (NAV) per share was Tk 80.08, and its net operating cash flow per share (NOCFPS) was Tk 20.56 as of June 30, 2023.
The company is regular in paying dividends to its shareholders, having declared a minimum of 15 per cent in cash dividends over the past 5 years, with dividend yields ranging from 2.4 per cent to 3.9 per cent.
Moreover, EHL paid its shareholders a 25 per cent cash dividend for the most recent fiscal year that ended on June 30, 2023.
Bangladesh's real estate sector is grappling with soaring construction material prices, resulting in a sharp 17 per cent decline in regular apartment sales in FY23. Meanwhile, EHL's revenue from apartment sales also plunged by 39.8 per cent during the period.
This situation poses challenges for EHL in realizing sales revenue from its ongoing and upcoming apartment projects, exacerbated by rising inflation, decreased household income, and expected interest rate hikes, said EBL Securities.
The company’s share prices closed at Tk 87.40 each on Thursday on the Dhaka Stock Exchange (DSE). With a market capitalisation of Tk 821 crore, the company has a paid-up capital of Tk 93.3 crore and a surplus reserve of Tk 654 crore.
Incorporated in 1964, Eastern Housing raised capital with an overwhelmingly subscribed IPO of shares and debentures, with a prospectus issued in July 1994.