Penang property market expected to contribute 50% of E&O’s FY16 sales target

PETALING JAYA (Sept 7): Eastern & Oriental Bhd (E&O) expects the Penang property sector to contribute 50% to its total annual sales of RM1 billion to RM1.5 billion from its various projects nationwide, digitalEdge DAILY reports today.

This projection is based on the group’s three-year business plan target until 2016, said its general manager, Penang segment, Christine Lau.

“Penang contributed 50% to E&O’s total revenue in FY15, making it a major driver for the group,” she said, adding that E&O’s unbilled sales for the state stood at RM868 million as at March 31, 2015.

In an email to digitaledge DAILY, Lau said the forecast is based on the roll-out of current launches, the difference in timing of launches and the maturity of property development projects.

She notes that the pattern will evolve from year to year as E&O simultaneously nurtures its three other key growth engines in Kuala Lumpur, Iskandar Malaysia in Johor, and the UK.

Meanwhile, no plans have been confirmed for the remaining 20 acres of the reclaimation of the first phase of Seri Tanjung Pinang (STP1). STP1 was reclaimed in 2007, of which 110 acres was handed over to the state government as part of E&O’s contractual obligation.

Reclamation for the remaining 760 acres under STP2 is expected to be completed by the end of this year, said Lau.

In its first quarter ended June 30, 2015 (1QFY16), E&O posted a 22.6% rise in net profit to RM23.25 million from a year ago, despite lower revenue of RM68.9 million compared with RM129.7 million previously.

The drop in revenue was mainly due to the 60% decline in revenue from the property segment in 1QFY15 to RM41.958 million from RM102.71 million a year ago.

The decline in revenue was attributed to lower revenue recognition following the completion of two blocks of the Quayside Andaman Condominium in STP1 in the previous financial year, said E&O in its financial statements.

Lau said the estimated gross development value (GDV) for ongoing projects comprising the Andaman Series, The Tamarind, and upcoming launches in Penang, amounted to RM2.6 billion.

“To date, we have achieved close to 90% sales for Tower 1A (for The Tamarind) while Tower 1B has recorded over 3,000 registrations. The 90% sales for Tower 1A with 552 units translates to approximately RM440 million,” she said, adding that the towers are expected to be completed in May 2019.

The Tamarind, a 6.9-acre freehold high-rise development with an estimated GDV of RM900 million, features two blocks of 33-storey buildings comprising a total of 1,104 units of condominiums.

Apart from 18 East at Andaman, which is part of the Andaman Series launched in January this year, E&O’s next target launch is the Amaris, comprising 29 luxurious terrace houses by the sea with a GDV of RM100 million, and 20 units of link villas with a GDV of about RM80 million in STP1, before the end of 2015.

She added that despite the soft market conditions, E&O is supported by proper planning and garnering positive response as seen with the Tamarind development. She is confident of  the long-term prospects of Penang, which has successfully attracted foreign direct investments.

“Our existing growth engines across Penang, KL and Iskandar should keep us busy for the next 10 to 15 years, at the least, while we remain open to  new strategic opportunities across the Kuala Lumpur City Centre, Iskandar Malaysia, Penang and London as the property market recovers, stabilises and grows over the medium- to long-term,” said Lau.