E&O eyes foreign buyers to realise FY16 earnings goal

KUALA LUMPUR (Sept 30): High-end property developer Eastern & Oriental Bhd (E&O) is maintaining its target of achieving RM173 million in net profit for the financial year ending March 31, 2016 (FY16) despite a challenging outlook for the company in view of the soft property market.

E&O deputy managing director Eric Chan (pictured) said yesterday the company is looking to attract buyers from Southeast Asia and East Asia for its products.

“We are still keeping a keen eye on the figure. We have not revised it, but a lot will depend on the property market over the next six months,” Chan told reporters after the company's annual general meeting (AGM) and extraordinary general meeting (EGM) yesterday.

“A [branding and sales] programme is being put in place to go full scale regionally, internationally, to push products ... we’ll see how this plays out,” he said.

E&O sees the depreciating ringgit as a catalyst for international buyers to snap up its properties.

It has a net profit target of RM450 million from FY14 to FY16, of which 67% had been achieved as at its first quarter ended June 30, 2015 (1QFY16), which means it has RM148.5 million to go.

The company is banking on its condominium project 18 East At Andaman, located at Seri Tanjung Pinang (STP) in Penang, and condominium units St Mary Residences in Jalan Tengah, Kuala Lumpur, to attract regional buyers.

Chan said the programme is expected to kick-start next month. There will also be roadshows and advertising campaigns covering 11 cities in nine countries, like China, Japan, Taiwan, Singapore, Thailand and Indonesia.

Meanwhile, it is preparing to launch Phase 2 and Phase 3 of its Avira Garden Terraces project in Johor. Its first block of The Tamarind executive apartments in Penang has garnered 90% of sales despite the soft property market and Block B of the project is scheduled to be launched in 4QFY16.

On the reclamation works for its RM25 billion Phase 2 of the STP2 project, Chan said E&O has shortlisted two international firms and expects the contract to be awarded by year-end.

The job, initially expected to be awarded in July, hit a snag on costing issues due to the fluctuating value of the ringgit, he said.

The proposed STP2 involves the reclamation of 760 acres (307.56ha) of land. It will feature a 5km extension to the existing first phase of STP — which measures 240 acres — and two islands separated by a 50m wide canal.

About 130 acres of the reclaimed land will be handed over to the Penang government, which will in turn, use it to fund the RM6.3 billion integrated infrastructure project in a land swap deal with Consortium Zenith BUCG Sdn Bhd.

STP2, expected to be completed in 30 years, is part of the 980-acre reclamation project that E&O took over in 2003 after it was stalled in 1998 due to the Asian economic crisis.

Earlier at the AGM and EGM, shareholders approved the listing of unit E&O plc on the Alternative Investment Market of the London Stock Exchange.

He said the listing is expected to be completed by the first quarter of next year and pave the way for its expansion into the UK property market.

The listing of E&O plc was proposed to not only reduce the group's net gearing from 0.6 times in FY15 to 0.38 times, but also to raise funds for the redevelopment of three properties in London — ESCA House, Landmark House and Thames Tower — into residential and mixed-use developments.

E&O plans to raise £36 million (RM244 million) from the listing exercise, of which £17 million will be channelled towards the redevelopment. The listing is estimated to give E&O plc a market capitalisation of between £60 million to £70 million.

This article first appeared in The Edge Property pullout, on Sept 30, 2015.