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E&O posts 3Q net loss on forex loss, holding cost

KUALA LUMPUR (Feb 23): Eastern & Oriental Bhd (E&O) slipped into the red in the third financial quarter ended Dec 31, 2018 (3QFY19), posting a net loss of RM8.8 million compared with a net profit of RM21.98 million a year ago.

The lifestyle property developer attributed the loss to a RM11.6 million unrealised foreign exchange (forex) loss, as well as an estimated one-off RM44.6 million holding cost payable for the option to purchase land which was not exercised.

*E&O makes cash call of up to RM550m

*The Mews over 75% sold

In a statement yesterday, E&O managing director Kok Tuck Cheong said stripping out the holding cost and forex loss, its pre-tax profit for 3QFY19 would have been RM91.6 million, 10.39% higher than RM82.9 million in 3QFY18.

This resulted in the group reporting a loss per share of 0.67 sen compared with an earnings per share of 1.68 sen in 3QFY18.

Quarterly revenue also declined by 22.6% to RM256.95 million from RM331.9 million in 3QFY18, mainly attributable to the property segment which registered a decrease of RM53.97 million and the hospitality segment which registered a decrease of RM10.56 million.

The weak quarterly performance dragged down the group's net profit for the cumulative nine months (9MFY19) to post a lower net profit of RM24.15 million, down 61.6% from RM62.89 million a year ago, while revenue fell 9.3% to RM636.34 million from RM701.22 million in 9MFY18.

Notwithstanding the uncertainties and continued weakness in the property market, E&O said it achieved cumulative sales of RM251 million for 9MFY19 compared with RM236 million a year ago. Following this, the group’s inventory level has been successfully brought down by 28.37% to RM232.4 million.

While property market conditions continue to be challenging for the remaining fourth quarter, E&O said the group will continue to focus on the reduction of its inventory by offering attractive packages to buyers. 

Going forward, Kok said the development of Seri Tanjung Pinang Phase 2A (STP2A) in Penang and reclamation of STP2B and 2C are key to the value enhancement of the group and will provide for future launches beyond the 15 years it estimate it takes to complete the development of STP2A.

"A detailed masterplan is currently being finalised towards the creation of Penang’s foremost investment, residential, commercial and tourist destination. STP2A is expected to have a gross development value of over RM17 billion.

"The reclamation of STP2B and 2C will open the group to more joint venture opportunities like the joint venture master development of the entire STP2A with Kumpulan Wang Persaraan (Diperbadankan),” he added.

On Feb 11, the group had proposed to raise as much as RM550.3 million via a private placement and a rights issue of shares with warrants to fund its property development projects.

To this, Kok said: “With a net gearing of 0.39 times, the proposed equity raising will put the group on even stronger footing as we prepare for our next growth trajectory."

"As such, E&O’s fundamentals remain intact and we are committed and confident of our prospects going forward,” he added.

Shares in E&O closed down 1.5 sen or 1.68% to 88 sen yesterday, with 2.86 million shares done, bringing a market capitalisation of RM1.15 billion. — theedgemarkets.com

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