E&O working on disposing more non-core assets

KUCHING: While Eastern & Oriental Bhd (E&O) is working on disposing more non-core assets, analysts also believed E&O still needs to scour for partners that could open more new markets for the group’s mammoth development in Seri Tanjung Pinang 2 (STP2).

According to the research arm of Public Investment Bank Bhd (PublicInvest Research), a recent meeting with management revealed that E&O is working on disposing more non- core assets to lighten the group’s debt load.

PublicInvest Research noted that this was despite the recent announcement that E& O had successfully roped in Kumpulan Wang Persaraan (KWAP) as the group’s strategic partner for STP2A, which was estimated to raise circa RM900 million for E& O via circa RM130 million in restricted issue stocks and RM766 million for its 20 per cent stake in STP2A.

Publ i c I nvest Re s e a rch highlighted that E&O is working on disposing certain assets such as Straits Quay Retail (RM233 million book value), Lone Pine Hotel (RM69 million book value) and certain non-strategic landbank such as the group’s 0.9-acre land at Jalan Liew Weng Chee that has a market value of circa RM55 million.

“If the price is right, it will also offload its overseas undeveloped landbank namely Hammersmith and Esca that were purchased for a total of circa RM450 million.

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

It added that together with KWAP’s investment, the total capital of circa RM1.8 billion will be handy for E&O’s capital expenditure and focus on generating cash and strengthening balance sheets.

While positive with the emergence of KWAP as E&O’s 20 per cent equity partner for STP2A, PublicInvest Research believed that the group still needs to scour for partners that could open more new markets for E&O’s mammoth development in STP2.

The research arm noted that sales for Andaman Condominium are still slow with the average selling prices of RM1,300 to RM1,400 per square foot (psf), which are incidentally also the touted selling prices for STP2A.

Hence, PublicInvest Research reckoned unless the group starts selling in new markets, it will be challenging for STP2 to reap in sales given the currently-tough trading environment.

“As for progress, Phase 2A works have commenced and are on track to be completed by June 2018,” it said.