E&O PLANS MORE AS­SET SALES

PublicIn­vest looks favourably on firm’s com­mit­ment to re­duce debt

New Straits Times - - Business - KUALA LUMPUR

EAST­ERN & Ori­en­tal Bhd (E&O) is work­ing on dis­pos­ing of more of its non-core as­sets, in­clud­ing a re­tail build­ing and ho­tel, that could col­lec­tively be sold for more than RM900 mil­lion, to lighten its debt load.

Public In­vest­ment Bank Bhd (PublicIn­vest) dis­closed this after a re­cent meet­ing with E&O’s man­age­ment.

Its lat­est as­set mon­eti­sa­tion plans fol­low a re­cent an­nounce­ment that E&O had roped in Re­tire­ment Fund Inc (KWAP) as its strate­gic part­ner for its Sri Tan­jung Pi­nang Phase 2 (STP2A) de­vel­op­ment. The tie-up will raise some RM900 mil­lion for the prop­erty de­vel­oper.

PublicIn­vest said E&O’s to­tal cap­i­tal com­mit­ment for STP2A is es­ti­mated at RM1.8 bil­lion, in­clud­ing in­fra­struc­ture costs, and it still had 205ha re­main­ing to be re­claimed in other phases.

The firm is pos­i­tive that with the pos­si­ble dis­pos­als of Straits Quay Re­tail and Lone Pine Ho­tel, both in Pe­nang, as well as a plot of land here, it will help man­age E&O’s gear­ing and liq­uid­ity.

“Straits Quay Re­tail has a book value of RM233 mil­lion, while Lone Pine Ho­tel has a book value of RM69 mil­lion.

“Cer­tain non-strate­gic land­banks such as a 0.3ha plot in Jalan Liew Weng Chee here has a mar­ket value of RM55 mil­lion.

“If the price is right, it will also off­load its un­de­vel­oped over­seas land­bank, for ex­am­ple in Ham­mer­smith and Esca, which were pur­chased for RM450 mil­lion.

“Hence, the po­ten­tial pro­ceeds from the re­source con­ver­sion are es­ti­mated to be about RM900 mil­lion,” the firm said.

“To­gether with KWAP’s in­vest­ment, the to­tal cap­i­tal of RM1.8 bil­lion will prove handy for its cap­i­tal ex­pen­di­ture and help it fo­cus on gen­er­at­ing cash and strength­en­ing its bal­ance sheets.”

PublicIn­vest be­lieves E&O still needs to look for part­ners that could open new mar­kets for its mam­moth STP2 de­vel­op­ment, al­though it views the emer­gence of KWAP as the com­pany’s 20 per cent eq­uity part­ner for STP2A as a pos­i­tive.

“Sales for its An­daman Con­do­minium are still slow. Its av­er­age sell­ing price of be­tween RM1,300 and RM1,400 psf is in­ci­den­tally also the touted sell­ing price for STP2A.

“Hence, we believe that un­less the com­pany starts sell­ing in new mar­kets, it will be chal­leng­ing for STP2 to reap sales ben­e­fits, given the cur­rently tough trad­ing en­vi­ron­ment.” It said.

PublicIn­vest had a “neu­tral” call on E&O, with a higher tar­get price of RM2 from RM1.80 pre­vi­ously.

E&O closed 1.05 per cent lower to RM1.89 from RM1.91 on Tues­day, with 923,500 shares chang­ing hands.

...the po­ten­tial pro­ceeds from the re­source con­ver­sion are es­ti­mated to be about RM900 mil­lion. To­gether with KWAP’s in­vest­ment, the to­tal cap­i­tal of RM1.8 bil­lion will prove handy for its cap­i­tal ex­pen­di­ture and help it fo­cus on gen­er­at­ing cash and strength­en­ing its bal­ance sheets.

Public In­vest­ment Bank Bhd

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.