(file pix) Artist impression of the Seri Tanjung Pinang Phase Two project showing two bridges connecting Straits Quay and Gurney Drive to the reclaimed island. starpic by chan boon kai. 25/8/2013
KUALA LUMPUR: Eastern & Oriental Bhd
(E & O) explained that the RM135mil gap between the targeted and actual cumulative profits for the three financial years (FY) ended March 31, 2014 to 2016, was due to changing market conditions.
E & O managing director Kok Tuck Cheong said: “We explained to our shareholders that the profit after tax (PAT) commitment was made about four years ago under very different market conditions.
“To put matters in perspective, shareholders recognised that the group succeeded in meeting 70% of that goal despite the tough market conditions,” he said in a press statement issued after the AGM in Kuala Lumpur on Thursday.
E & O said it achieved RM315mil in cumulative PAT for FY14-FY16 instead of the targeted RM450mil.
Regarding the 75.2% year-on-year (y-o-y) drop in the group’s net profit to RM38.8mil for FY16, Kok said: “The lower y-o-y profit was due to slower sales of completed units, lower margins achieved, higher finance costs and higher sales and marketing costs in FY16.”
He also noted that the higher net profit in FY15 arose from a gain on disposal of RM100.7mil from a 49% strategic sale in the company’s subsidiary, Patsawan Properties Sdn Bhd, to its joint-venture (JV) partner Mitsui Fudosan Asia Pte Ltd. “This sale was in relation to the land for our JV project at Jalan Conlay,” he said.
E & O announced to Bursa Malaysia on Thursday that it posted an unaudited net profit of RM3.81mil for the first quarter ended June 30, 2016, a drop from RM23.34mil achieved a year earlier.
In its explanation, E & O said the higher operating profit in the property segment was dampened by lower contribution from the share of result of an associate which registered a share of profit of RM20.72mil following the sale of a piece of land in the previous corresponding financial quarter.
On a more positive note, E&O said in the press statement that its shareholders were assured by the record RM1.1bil annual new property sales achieved by the group in FY16, which are expected to drive the company’s bottomline performance for the next two years.
These robust sales were anchored by The Tamarind in Seri Tanjung Pinang, E&O’s first offering of executive apartments which were successfully launched and close to 90% taken up despite the prevailing weak market sentiment.
“The Tamarind was conceptualised as E & O’s first offering of residential units aimed at young families aspiring to be part of the Seri Tanjung Pinang lifestyle.
“The encouraging response we received for The Tamarind underscores our focus on anticipating and responding to customers’ demands, as well as the established E & O brand and the success of our Seri Tanjung Pinang masterplanned development,” said Kok.
With regards to E&O’s net gearing of 0.78 times, Kok said: “Our gearing ratio is manageable for our current state of operations where we are in the midst of reclaiming Seri Tanjung Pinang Phase 2.
“Notwithstanding this, E & O continues to be vigilant in managing the gearing ratio through the mobilisation of our existing inventory to generate cashflow.”
A prime focus for E & O in this financial year would be the progress of ongoing reclamation works and to secure a strategic partner for its catalyst Seri Tanjung Pinang Phase 2 project in Penang, the company said.
To-date, E&O has begun reclamation and dredging works for phase 2A of the Seri Tanjung Pinang Phase 2 project after obtaining the requisite authorities’ approvals which includes approval for a Detailed Environmental Impact Assessment study.
Overseas, E&O’s focus is to execute existing projects and to further explore development management opportunities within the UK and European Union in partnership with institutional investors.
“In the UK, we are currently handing over our maiden development project in Central London, Princes House. ESCA House, located in the prime Palace Court address, has gained planning approval while the application for planning approval is in progress for the 1.2-acre freehold land at Hammersmith,” Kok said.
Kok said the group’s focus for FY17 and beyond would be to intensify its marketing efforts to mobilise existing inventory sales; implement new launches prudently and manage joint developments effectively; ensure the timely and compliant completion of major development projects and phase 2A of Seri Tanjung Pinang Phase 2; and proactively manage inventory whilst maintaining strong sales efforts in order to generate positive cashflow and profit recognition.
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