Friday, June 6, 2014

E&O - STP2's Pricing Land Values Trigger Its NAV Upgrades

Its net asset value per share stood at rm4.61 which include assumed land value of rm250 psf for Phase 2 of the company’s Seri Tanjung Pinang (STP2) project.

Observers see a more balanced shareholding structure after E&O MD Datuk Tham increased his stake in the company.

Tham’s higher stake in E&O should demonstrate the management’s commitment to ensuring a smooth execution of STP2.

Management’s reaffirmed that STP2’s master plan is expected to be endorsed by the Penang government in June 2014. E&O is currently (June 2014) exploring funding options for the reclamation of land for STP2.

Management also alluded that there is little need for equity fund raising given E&O’s strong balance sheet – net gearing of 30% as at financial year 2014 ended March 31 and the strong development potential of STP2.

Land was transacted at rm600 and rm700 psf in Tanjung Tokong area (June 2014) in Penang where STP2 will be developed. At the moment, there is a range of imputed land values for STP2 in the market.

It is believed that E&O may carve out select parcels for commercial developments, which will be sold to reputable global//regional developers once it commences reclamation works for STP2. Such a move will not only set a precedent in pricing land values in STP2 but also trigger significant NAV upgrades. This is crucial share price driver.

Meanwhile E&O is looking to step in prices for the remaining 250 terraced units at Avira in Iskandar Malaysia, Johor.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.