Wan Azmi enters E&O ... again
His company buys 9.09% stake in Penang developer
KUALA LUMPUR: Prominent businessman Tan Sri Wan Azmi Wan Hamzah has emerged as a substantial shareholder in Eastern & Oriental Bhd (E&O) after his corporate vehicle, Sweetwater SPV Sdn Bhd, took up a 9.09% stake in the property company by subscribing to a private placement.
This will mark the second time that the businessman has held a large stake in the predominantly Penang-based company after buying 130.2 million shares at 98 sen a share for a total of RM127.6mil.
“Specific companies can be undervalued by the markets and this was a buying opportunity of a specific company,” Wan Azmi told StarBiz in an interview yesterday.
Wan Azmi, who was a shareholder in E&O prior to selling his then 11.95% stake when Sime Darby bought a 30% block in E&O in 2011, said he paid for the latest block of shares from the proceeds of selling Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash).
He had owned 30% of Splash and the water company was sold to Pengurusan Air Selangor Sdn Bhd for RM2.55bil. Only some final paperwork needs to be signed before the money is credited to shareholders of Splash.
Wan Azmi said E&O appealed to him, not just because he was familiar with the developer, but also the prospects the company presents.
“It is not a company that is overly exposed to the different areas like central Kuala Lumpur. E&O has been timid in its launches over the past few years,” he said.
It is the Penang market that E&O is exposed to that Wan Azmi feels has tremendous upside for the property company.
“Penang is probably more robust than most,” he said.
It is the potential of drawing in buyers from a number of localities to E&O’s reclamation work at Seri Tanjung Pinang (STP) and the high-end development potential on the reclaimed land that excites him the most.
Phase two of the reclamation project is to the north of Gurney Drive in Penang and covers an area of 760 acres.
E&O undertook a cash call from shareholders and a private placement to raise funding to complete phase two of STP.
The company said it intends to raise some RM550mil to fund that reclamation work.
“As an incoming investor, I have very little to dislike about the company,” said Wan Azmi.
E&O said a detailed masterplan was currently being finalised for STP phase 2A (STP2A), while infrastructure work has started with the building of the first bridge to the site. STP2A is expected to have a gross development value of over RM17bil and will be developed over a period of 15 years.
“After careful consideration of our current financial commitments, the group believes that this fund-raising exercise is timely and supports our overall plan to rightsize the balance sheet with lower gearing.
“With reclamation works nearing completion at STP2A, resources are now focused on creating a new prime seafront address, building further on the success achieved in our flagship development of STP phase one.
“Wan Azmi’s investment is highly opportune. A well-respected private investor with solid financial resources and track record, he also benefits from clear understanding of the group, having been a significant shareholder from 2006 to 2011.
“His investment in E&O demonstrates the value he sees in the group’s prospects and we are optimistic that the market will view this endorsement positively,” said E&O managing director Kok Tuck Cheong.
Proceeds from the fund-raising exercise will be mainly utilised for the infrastructure and development works at STP2A, as well as working capital and loan repayments.
Wan Azmi also foresees the future profitability of E&O to be mainly driven by the development of STP2 followed by the expansion of STP3 and STP4.
“The task to get these developments going forward will keep E&O’s hands pretty full, meaning that they can afford to put the challenging factors on the back burner,” he pointed out.
Wan Azmi, who is unfazed about the soft property market conditions, believes that “cycles come and cycles go”, adding that the development would reap its benefit once the market recovers.
Although E&O is looking to raise RM123mil for the rights issue, he expects monies raised from his investment and the profitability of STP2 to be sufficient for the development works of STP3 and STP4.
“I hope my subscription to the private placement and the rights issue will also address the net gearing of the company,” he said.
In the near future, should Wan Azmi receive his Splash proceeds, he said “I would like to make an investment that is a positive endorsement for the country.”