This article first appeared in The Edge Malaysia Weekly on March 4, 2024 - March 10, 2024

KEDAH-based property developer Eupe Corp Bhd, which has total unbilled sales of RM720 million, is currently relying on its two ongoing projects in the Klang Valley — Est8 @ Seputeh in Kuala Lumpur and Helix2 @ PJ South in Petaling Jaya — as the company’s main money-spinners.

By next year, Eupe will have five major projects, including two of its biggest-ever residential projects — Circadia @ Belfield in Kuala Lumpur and Edgewater Estate in Sungai Petani, Kedah — feeding into the group’s bottom line.

Eupe managing director Datuk Beh Huck Lee highlights that the company’s unbilled sales give a strong line of sight to the consistency of its future revenue trajectory and earnings visibility.

“The total remaining GDV (gross development value) for our current ongoing and upcoming project portfolio is around RM2 billion, more than double the figure prior to Covid.

“This includes Circadia, which will be our first billion-plus project. For that, we’re expecting strong growth in both revenue and profit in the coming years,” Beh tells The Edge in an interview.

The 42-storey Est8 and 34-storey Helix2, launched in November 2021 and October 2022 respectively, have a combined GDV of more than RM800 million (see table).

“Both Est8 and Helix2 have take-up rates above 90%. The construction of Est8 has reached Level 21 and Helix2 has reached Level 20. Both are on schedule and we expect them to be completed around the middle of next year,” says Beh.

Eupe plans to launch Circadia this December, followed by Edgewater in May next year. Both projects are anticipated to fetch a combined GDV of RM1.56 billion.

Meanwhile, the group is also in the process of launching various phases of Villa Natura, a landed property project in Sungai Petani, between April last year and August this year.

Beh says the planning for Circadia and Edgewater is progressing well.

“Both projects are in the advanced planning stages and are our largest so far. Our current projects in both KL and Kedah are selling well. We are poised to return record levels of revenue and profit, which was interrupted during the Covid period,” he says.

Eupe’s net profit had fallen from its record high of RM43.4 million in the financial year ended Feb 28, 2021 (FY2021), to RM23.4 million in FY2022 and RM26.1 million in FY2023. In the nine months ended Nov 30, 2023 (9MFY2024), the company’s earnings grew 40.5% to RM20.86 million, up from RM14.84 million a year ago.

Eupe was co-founded by Beh’s father, Datuk Beh Heng Seong, in 1986. It started with selling 3,300 low-cost houses, dubbed Taman Ria, in Sungai Petani at RM25,000 each.

Subsequently, Eupe built Cinta Sayang Golf & Country Resort in 1987, when the group’s foundation was being laid. In 1997, Eupe was listed on the Main Market of the Kuala Lumpur Stock Exchange.

In 2016, Eupe embarked on its first project in KL, called Novum @ Bangsar South, a joint venture (JV) with Aera Property Group Sdn Bhd, a property firm controlled by Chin Hin group founder Datuk Seri Chiau Beng Teik, who also hails from Kedah.

Beh observes that the Northern region is experiencing one of its strongest periods.

“The market has rebounded strongly in Kedah and we are particularly pleased with the take-up of our Villa Natura project. The first two stages were sold very quickly and we’ve fast-tracked the roll-out of Stages 3 and 4 to meet strong demand for what is a unique offering in the Kedah affordable housing market,” he says.

Beh adds that revenue from the Villa Natura project will be pivotal to sustaining good returns in Eupe’s Northern property division in the future.

Besides, Eupe’s Edgewater project will be the group’s biggest project in the Northern region so far and provide significant revenue flows from 2026.

Beh, 54, was appointed to the board of Eupe in 1997. Along with his mother Datin Teoh Choon Boay, he owns more than 40% of the company, held through their investment vehicles, Betaj Holdings Sdn Bhd and Beh Heng Seong Sdn Bhd.

Interestingly, among Eupe’s top 30 shareholders is former investment banker-turned-private investor Ian Yoong Kah Yin, who owned a 0.78% stake, or one million shares, as at May 31 last year.

Notably, on Oct 26 last year, Eupe proposed a 15% private placement exercise involving the issuance of 19.2 million shares to raise up to RM15.36 million, which will be allocated mainly to part-finance the infrastructure works for the group’s land in Kuala Muda, Kedah.

RHB Investment Bank Bhd was appointed as the principal adviser and placement agent.

So far, 13.6 million placement shares have been placed out in Tranche 1, of which five million shares were subscribed by private wealth management firm Areca Capital Sdn Bhd and insurance company Allianz Malaysia.

Over the past six months, shares in Eupe had declined by four sen, or 4%, to close at 86 sen apiece last Friday, giving it a market capitalisation of RM122.48 million. The counter is currently trading at a historical price-earnings ratio of 3.5 times and a price-to-book value of 0.25 times.

Yoong tells The Edge that Eupe is “one of the most undervalued listed property developers” on Bursa Malaysia.

“The total value of Eupe’s project pipeline is estimated to be RM2 billion; that’s a formidable achievement for a property developer with a market capitalisation of about RM125 million,” he says.

He points out, however, that the company’s ongoing private placement exercise “is a disappointment”.

“It is not advisable to issue new ordinary shares when the company is grossly undervalued, unless it desperately needs cash. Eupe’s balance sheet is sound. The impact of issuing new ordinary shares at steep discounts to fair valuation might impair its return on equity and dilute its net earnings per share,” he warns.

Yoong advises listed companies that are greatly undervalued to borrow from banks at reasonable interest rates or issue bonds or fixed income securities. “In the event that these sources of funding are not available, undertake a rights issue.”

Nevertheless, Beh defends Eupe’s decision to undertake the private placement exercise, as he believes it could raise the company’s profile in the equity markets.

“We are now progressing into the second stage of our growth strategy. The first stage was executing our points of design difference, building our brand in KL and consolidating our corporate and financial structures,” he says.

“This second stage is aimed at strengthening the foundation that we’ve built since expanding the KL market and providing the resources that will allow us to expand our current growth trajectory in a sustainable way.”

Central to the second stage of Eupe’s growth strategy, says Beh, is the private placement exercise, which is aimed at raising its profile among investors.

“With this initial corporate exercise, we aim to realise the underlying value of the company that we are creating, and provide us with additional resources to fund our next stage of growth and beyond,” he says.

Commenting on Eupe’s stock price performance, Beh admits that he is “very conscious” that the company’s shares have not moved in tandem with its expansion in recent years.

“A key facet of our growth strategy’s second stage is to better realise the value we have created during this time and have it reflected in our overall company value. At the moment, our shareholder base is quite narrow. This has restricted our liquidity and potential share price movement.

“Through the private placement currently underway, we’re aiming to expand this base and create a bigger profile in the equity markets, which we hope will see our increasing value as a company better recognised in our share price,” he reiterates. 

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