In a strategic move to fuel the development of its ambitious 760-acre Andaman Island project in Penang, property developer Eastern & Oriental Bhd (E&O) is finalizing discussions with banks to secure financing between RM1 billion and RM1.5 billion. According to Managing Director Kok Tuck Cheong, the second phase of this expansive project necessitates a total investment of RM2 billion, marking a significant phase in the company’s growth trajectory.
Strategic Financing and Asset Monetization
Despite the substantial funding required for the completion of Andaman Island, E&O plans to strategically manage its financial resources. The company aims to leverage its existing assets and the ongoing revenue from property launches and its hospitality division to supplement the required capital. “We have engaged with several banks interested in providing direct lending to support our vision. Additionally, we are addressing a RM1.3 billion sukuk repayment,” Kok explained during E&O’s quarterly earnings briefing.
Capital Raised Through Rights Issuance
Earlier in the year, E&O bolstered its financial standing by raising RM255.76 million through the issuance of 1.09 billion five-year irredeemable convertible loan stocks. With a portion of the proceeds already utilized, the company ensures a strategic allocation of the remaining funds towards the project’s development, with a clear utilization plan extending to March 2026.
Financial Performance and Sales Milestones
E&O has reported an increase in its net gearing ratio, from 0.47 to 0.51, reflecting the company’s leveraged investment in growth. Despite this, E&O anticipates record-breaking annual sales for FY2024, having already amassed RM1.18 billion in unbilled sales during the first nine months, a figure nearly eclipsing its 2016 record.
The Andaman Island project has seen significant market interest, with the first phase achieving RM1.1 billion in sales within just 15 months. The project’s initial phases have demonstrated robust demand, particularly for landed units and the Arica serviced apartments, which achieved a 95% take-up rate shortly after launch.
Upcoming Developments and Revenue Growth
Looking ahead, E&O plans to introduce a range of luxury residential offerings, including a low-density luxury condominium slated for launch in 1QFY2025. This aligns with the company’s strategy to cater to evolving market expectations and sustain its growth momentum.
For 3QFY2024, E&O reported a commendable increase in net profit and revenue, underscored by a notable performance in its property segment. The company’s strategic shareholder base and positive market valuation further bolster its financial resilience and growth prospects.
Market Response and Future Outlook
E&O shares experienced a positive uptick following the announcement, reflecting investor confidence in the company’s strategic direction and the potential of the Andaman Island project. As E&O continues to navigate its ambitious development plans and financial structuring, the market watches closely for the impact of these initiatives on its long-term growth and profitability.
