E&O in talks with banks to raise RM1.5 bil for Andaman Island project

• Earlier this year, the group raised RM255.76 million from the rights issuance of 1.09 billion five-year irredeemable convertible loan stocks at 23.5 sen apiece. According to the developer, it has used RM71.87 million of the proceeds and RM183.89 million remains to be used by March 2026.

KUALA LUMPUR (Feb 22): Property developer Eastern & Oriental Bhd (E&O) is in talks with banks to finalise the mechanism to raise between RM1 billion to RM1.5 billion for the development of its 760-acre Andaman Island project in Penang.

According to its managing director Kok Tuck Cheong (pictured), the second phase of the project would require funds totalling RM2 billion.

“We need RM2 billion to complete the second half of the island, but we don't need a RM2 billion financing in place because it [the project] is for a longer period [around five years], [so] we will be able to monetise some of our existing assets [for it]. [While] launches of property projects will generate cash flows, we have a hospitality division to support,” he said.

“So, we are talking to banks for about RM1 billion to RM1.5 billion. Other banks have expressed their interest in doing a direct lending to support us. We have a RM1.3 billion sukuk that we are also paying now,” he told analysts and reporters at E&O's quarterly results briefing on Thursday.

Earlier this year, the group raised RM255.76 million from the rights issuance of 1.09 billion five-year irredeemable convertible loan stocks at 23.5 sen apiece. According to the developer, it has used RM71.87 million of the proceeds and RM183.89 million remains to be used by March 2026.

For the financial period ended Dec 31, 2023 (3QFY2024), E&O saw its net gearing ratio increased to 0.51 from 0.47 recorded as at end-March, 2023. Going forward, the group expects its gearing to increase further, albeit gradually.

On path for record sales for FY2024

E&O also said the group is on the path to achieve its highest annual sales in FY2024, with RM1.18 billion unbilled sales recorded in the first nine months of the year (9MFY2024), which is almost surpassing its previous record high of RM1.2 billion achieved in 2016. Of the 9MFY2024 sales, 66% were generated from its projects in Penang.

The group, in a statement, said the first phase of the Andaman Island project had been well-received by the domestic market, as it had managed to sell RM1.1 billion worth of products within 15 months.

According to the company, the first phase for the landed units on Andaman Island, with a gross development value (GDV) of RM140 million, had been fully taken up after its initial launch in January this year. The second phase of the project, with an estimated GDV of RM135 million, was launched this month.

Meanwhile, its 380-unit serviced apartment Arica, with a GDV of RM410 million, saw a take-up rate of 95% within 10 months after its initial launch last year.

“In the coming months, we have plans to design and launch a range of curated product offerings catering to market expectations. Our upcoming project, a low-density luxury condominium comprising 261 units, is targeted for launch in the second quarter of 2024 (1QFY2025) [in Penang],” it said.

For 3QFY2024, E&O reported a 14.47% growth in net profit to RM34.44 million from RM30.09 million in the corresponding quarter of the previous year, while its quarterly revenue rose 13.58% to RM92.23 million from RM81.2 million.

Its property segment posted a 20.7% jump in revenue to RM220.2 million in 3QFY2024, from RM182.41 million a year earlier.

The group's substantial shareholders include Amazing Parade Sdn Bhd (30.48%), Kerjaya Prospek Development (M) Sdn Bhd (12.88%), Paramount Spring Sdn Bhd (6.49%) and the Retirement Fund (Inc) or KWAP (6.01%).

E&O shares closed 2.5 sen or 2.96% higher at 87 sen per share, giving the group a market capitalisation of RM1.75 billion.

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