E&O rumoured to be disposing Straits Quay Mall

KUCHING: Eastern and Oriental Bhd (E&O) is rumoured to be in talks of the disposal of some of its Penang assets, particularly the Straits Quay Mall and a convention centre for a total consideration of RM230 million.

The mall, which is located in Straits Quay Marina of E&O's Seri Tanjung Pinang (STP) project, has a total net lettable area of 270,000 square feet and a current occupancy rate of 80 per cent. The convention centre on the other hand has a total area of 25,300 square feet.

According to the team at MIDF Amanah Investment Bank Bhd (MIDF Research), the rumoured deal was unsurprising as E&O had previously guided they may dispose assets to pare down its borrowings.

The purported figure of RM230 million was also within expectations as it is close to its net book value of RM233 million.

That being said, the research arm is positive on the deal should it materialise as the fair deal would help improve the balance sheet of E&O by paring down its borrowings.

“We estimate net gearing of E&O to reduce to 0.44 fold from the current 0.57 fold.”

Additionally, the disposal is not expected to have any significant financial impact on E& O's earnings as the assets which are under E&O's wholly-owned subsidiary, E& O Trading Sdn Bhd appears to not be churning any profit.

“Hence, we expect the reported disposal to have minimal impact on E&O earnings if it materialises,” guided the research arm.