E&O’s Lone Pine Hotel disposal to strengthen balance sheet
KUALA LUMPUR: Eastern & Oriental Bhd’s (E&O) Lone Pine Hotel disposal has been viewed positively by analysts as this will strengthen the group’s balance sheet via realising cash resources.
In a filing on Bursa Malaysia, E&O’s board of directors announced that wholly-owned Eastern & Oriental Hotel Sdn Bhd has entered into a share sale agreement with Langkawi Saga Shopping Centre Sdn Bhd and Lubritrade Trading Pte Ltd for the disposal of all its 10 million ordinary shares of RM1 each and 41,500 preference shares of RM0.10 each in E&O Express Sdn Bhd (EOE), representing its entire shareholding interest in EOE for a total consideration of RM85 million.
EOE is currently the owner of the Lone Pine Hotel and the legal and beneficial owner of that piece of land on which the hotel was built upon. The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) viewed the disposal positively as the disposal could help reduce net gearing of E&O to 0.68-fold from 0.71-fold as of March 2017.
The research arm of Public Investment Bank Bhd (PublicInvest Research) was also positive on the asset sale as this will strengthen the group’s balance sheet via realising cash resources which can then be deployed into identified projects and investments to maximise returns. PublicInvest Research has kept its earnings estimates unchanged for now pending completion of the deal.
According to MIDF Research, loss of earnings contribution from Lone Pine Hotel is expected to be minimal as hospitality division of E&O only contributed 2.8 per cent to total operating profit in financial year 2017 (FY17).