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E&O rises 5.36% after fixing dates for bonus issue and warrants

KUALA LUMPUR (Jan 9): Eastern & Oriental Bhd rose as much as 5.36% or 12 sen to RM2.36 today, after the property developer fixed the ex-date and entitlement date for its bonus issues and warrants yesterday evening.
 
The counter eased to RM2.33 as at 2.32pm, after some 1.36 million shares changed hands, giving it a market capitalisation of RM2.59 billion.
 
E&O’s 1-for-10 bonus issue of up to 114.1 million shares and 1-for-5 warrants of up to 228.2 million, will go ex on Jan 20, with an entitlement date set on Jan 22.
 
The exercise price for the warrants is fixed at RM2.60 per share. Shareholders' entitlement of the bonus issue and free detachable warrants should underpin share price performance, AmResearch said in a note today.
 
AmResearch reaffirmed its “buy” call on E&O, with an unchanged fair value of RM4.73, based on a 50% discount to its net asset value (NAV) of RM9.47.
 
“Our NAV is based on an assumed land value of RM500 per sq ft for Sri Tanjung Pinang 2 (STP2),” AmResearch said.
 
On a separate note, AmResearch understands that the upcoming launch of Executive Homes called Tamarind, located at Seri Tanjung Pinang Phase 1 (STP 1) in Penang, had garnered strong interest of more than 3,000 registrations — mainly from Penangites.
 
Tamarind sits on seven acres of land with a gross development value (GDV) of RM900mil (>1,000 units). Unit sizes are between 900sf and 1,300sf. Tamarind is earmarked for launch by the first quarter of calendar year 2015 (1QCY15).
 
“We think that the take-up rate for Tamarind should be encouraging, due to the affordable prices,” It said.
 
AmResearch noted selling price is expected to come below RM1,000psf or RM1mil/unit, given Tamarind’s feature as a mainstream product, unlike E&O’s other niche developments. Ivory Properties’ City Residence nearby, is selling between RM900psf and RM1,000psf, while units for the Fettes Residences development by IOI Properties, are currently transacted between RM850psf and RM900psf.
 
“We advise investors to accumulate the stock, in view of the current share price weakness. The key catalyst hinges on E&O’s execution to monetise land value at STP2, to set the benchmark price. This, we opine, will result in a significant renewed buying interest for E&O,” it added.

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