PublicInvest lowers E&O’s target price after private placement ‘surprise’

KUALA LUMPUR: Eastern & Oriental Bhd’s (E&O) plan to raise up to RM550 million from a private placement comes as a negative surprise, said Public Investment Bank Bhd (PublicInvest).

PublicInvest had expected the group to raise funds by selling non-strategic assets or getting more strategic partners for its Seri Tanjung Pinang Phase 2 (STP2) development in Penang.

E&O on Monday had proposed to raise funds via a private placement of up to 10 per cent of its 1.3 billion issued shares and a renounceable rights issue with free detachable warrants, with prices to be determined later.

PublicInvest believes the main reason for the fundraising was the repayment of borrowings and to fund its property development business.

STP2 is E&O’s key project spanning 15 to 20 years. The first phase is on track to be completed late this year.

“We understand that the maiden launch of a condominium project at STP2 is planned for the first half of this year,” said PublicInvest in a report yesterday.

It said based on an illustrative issue price of RM1.12 per share, E&O’s real net asset value (RNAV) could be diluted to RM2.80 to RM3.30 per share from RM4.

“We maintain our ‘neutral’ stance but with the target price reduced to RM1 (from RM1.30 previously), pegged at higher 75 per cent discount to RNAV,” it added.