E&O to appoint reclamation contractor for STP2
KUCHING: Eastern & Oriental Bhd ( E&O) is expected to appoint a reclamation contractor for the company’s Seri Tanjung Pinang Phase 2 (STP2) project soon.
Affin Hwang Investment Bank Bhd (Affin Hwang) in a report yesterday said the company is finalising the appointment of one of the four foreign-led consortiums that submitted tenders as the contractor to undertake the 253- acre ( 102 hectare) land reclamation works under STP Phase 2A.
The research firm said the appointment of a reclamation contractor will allow E& O to lock in the reclamation cost, which is expected to be lower than initial estimates due to the decline in crude oil price.
Additionally, Affin Hwang said E& O is looking for investors to jointly develop STP Phase 2A.
The research firm added E& O is looking for long-term investor with strong financial position to jointly develop the project.
It observed that E& O will retain at least 51 per cent stake in the joint venture with potential partners to develop Phase 2A, which is a condition imposed by the Penang state government in approving the project.
Besides that, the research firm noted interested parties were carrying out preliminary due diligence on the project.
Affin Hwang gathered the company is targeting to secure a partner within six months after awarding the reclamation contract.
On another note, Affin Hwang observed that E& O achieved property pre- sales of RM585 million in first quarter financial year 2016 (1QFY16) ended June 2015.
The research firm said the amount was higher than the preliminary estimate of RM450 million.
Af f in Hwang noted the stronger than expected property pre-sales was contributed by the launch of Tamarind Tower A in Penang with an estimated gross development value (GDV) of RM472 million.
Given the strong, pre- sales achieved in 1QFY16 and strong pipeline of property launches in the coming months, Affin Hwang bel ieved that the property developer is on track to achieve the pre- sales target of RM1 billion in financial year 2016 ( FY16).
Hence, the research firm remains optimistic on the property sales and earnings growth of the company in the near term.