E&O to offload more non-core assets: Analyst

PETALING JAYA: Eastern & Oriental Bhd (E&O) is working on disposing of more non-core assets to lighten its debt load, after successfully roping in Retirement Inc Fund (KWAP) as its strategic partner for Phase 2A of the Seri Tanjung Pinang (STP2A) development project in Penang, according to PublicInvest Research.

In a note yesterday, PublicInvest analyst Tan Siang Hing said the assets that could be disposed of include the group’s hotels such as Straits Quay and Lone Pine, and certain non-strategic landbank that could collectively be sold for more than RM400 million.

“If the price is right, it will also offload its overseas undeveloped landbank i.e. Hammersmith and Esca that were purchased for a total of RM450 million. Hence, the potential proceeds from the resource conversion are estimated to be RM900 million.

“This is important in our view, to manage its gearing (currently at 0.74 times) and liquidity,” he added.

The group’s total capital commitment for STP2A is estimated at RM1.8 billion (including infrastructure costs) and it still has 507 acres to be reclaimed in other phases.

Together with KWAP’s investment, Tan said, the total capital of RM1.8 billion for STP2A will be handy for its capital expenditure and strengthening of its balance sheets.

However, he said while the emergence of KWAP as the group’s strategic partner is positive, the key issue is still selling the properties with the average selling prices said to be around RM1,300 psf for the proposed new projects.

PublicInvest maintained its neutral stance on E&O, but target price is nudged higher at RM2, from RM1.80 previously.