E&O sets dividend payout policy at 30%, positive on outlook

KUALA LUMPUR: Property developer Eastern & Oriental Bhd (E&O) has set a dividend policy to pay out at least 30% of its after-tax profit as dividends, starting this financial year.

“We are in a position to implement this,” said E&O’s executive director Eric Chan at a press conference after the company’s AGM here yesterday.

Shareholders who were present at the company’s AGM welcomed the new dividend policy. However, whether this will translate into something more attractive for the shareholders depends on the quantum of the company’s profit going forward.

For its first three months of FY11 ending March, E&O posted a net profit of RM10.23 million or 0.96 sen a share on the back of RM46.31 million in revenue. The 1QFY11 net profit had more than doubled from RM5.05 million registered in the previous corresponding period.

Chan foresees better times ahead for E&O after the company turned the corner in FY10 ended March 31 with a net profit of RM70.89 million or 6.66 sen per share.

He said before this the group achieved, at the most, RM600 million in terms of annual properties sales. But last year it hit sales of RM800 million.  

“So we have surpassed our performance in terms of activities,” said Chan.

E&O has cash and bank balances amounting to almost RM559 million as at end-June. The group has beefed up its war chest after raising RM481 million from a rights issue of irredeemable convertible secured loan stocks (ICSLS) last year and the disposal of non-strategic landbank.

Chan said the stronger balance sheet will strengthen E&O’s position in further expanding its landbank and to kickstart more development projects.

He added that the group would look at opportunistic acquisitions if the property market turns around. But there is currently no rush in terms of buying more land.

“We have over 300 acres in the Klang Valley, which will last us six to eight years. In Penang, including what is to be reclaimed, we have over 1,000 acres of landbank, and that will last us 12 to 15 years. So there’s no push to purchase,” Chan said.

At present, in the Klang Valley, E&O is developing the St Mary’s Residences project located in the golden triangle, The Peak in Damansara Heights, and other developments in Jalan Yap Kwan Seng and Bukit Tunku, among others. In Penang, the group is developing its Seafront Terraces, Seafront Villa’s, and Quayside 1 and 2, all on the mainland.

In total, these developments have an estimated gross development value of RM4 billion, but Chan said the group will time its launches carefully depending on demand situation.

Other than these projects, E&O is also planning developments at Kemensah Heights near the national zoo, and the second phase of Seri Tanjung Pinang, which involves land reclamation.

On market talk that the group was facing issues with regard to land reclamation in Penang, Chan said: “From day one, there has been no issue with reclamation. Of course, there were rumours. But time and time again, we have proved to the bankers that we have complied with best practices.”   

On E&O’s prospects, Chan said: “The hardware is put in place, now we have to look at the market conditions to reap the rewards. We have more rooms to sell, so we will have a better performance if tourism picks up, our property development arm has RM4 billion worth of properties to sell. We are in expansion mode.”

For FY10 ended March 31, E&O is paying a first and final dividend of 3.8% or 3.8 sen per share, less 25% tax. The dividends go ex on Oct 14 , while the entitlement date is on Oct 18.

The FY10 dividend of 3.8 sen a share represented a 58% payout considering E&O’s earnings per share of 6.6 sen for the financial year. In terms of yield, it is at about 3.5% with E&O’s closing price of RM1.17 yesterday.

This article appeared in The Edge Financial Daily, September 30, 2010.