Tycoon Terry Tham's E&O play

KUALA LUMPUR: Datuk Seri Terry Tham Ka Hon’s re-emergence as the single largest shareholder in Eastern & Oriental Bhd (E&O) has sparked interest in the high-end property developer.

What has puzzled the market is the fact that Tham is buying back the shares he had originally sold to Sime Darby Bhd in 2011.

If the latest share purchase agreement is concluded, Tham will have bought from Sime more E&O shares than he had previously sold to the conglomerate.

In an e-mail interview with StarBiz, Tham said E&O had tremendous potential to achieve much more, and that he believed he could still contribute significantly towards this.

“I thought I could work towards retirement, but I realised that there is so much more that can be achieved for E&O, and I do still believe I am able to contribute significantly, and on a more personal side, I want to continue to keep myself busy.

“This move reinforces my continued commitment, conviction and confidence in the group and the brand that I have had a hand in building through the years,” he said.

Tham, who was left with a 5% stake in E&O following the sale of shares to Sime in 2011, had in May 2014 paid RM319mil to Sime for 110 million shares (9.9%) in the property development company.

Last Friday, he said he would be forking out RM342mil more for another 10% stake from the conglomerate, which will bring his holdings to around 21%.

One theory has it that Tham might have been planning to sell part of this block of E&O shares to a new strategic shareholder, possibly a party from mainland China.

However, Tham brushed aside this possibility, saying it was just a rumour.

When he bought the first tranche in 2014, Tham had told StarBiz that he was “in for the long haul” with E&O and that his acquisition of the shares at a premium to the market price was firm indication of his commitment.

“I will also be giving an option to my top management to purchase an equity stake in the company to enjoy the fruits of its success,” he had said in an interview.

E&O’s filings with the stock exchange in 2014 stated that Tham had the option of inviting senior management to participate in the purchase of the block of shares that made up 9.9% of the property developer at the time.

Tham said then that core team in E&O comprised 16 people who had been with him for many years and played a role in building the company from an entity with a market capitalisation of RM150mil.

Today, E&O has a market capitalisation of more than RM2bil.

MIDF Research said that it viewed Tham’s move to increase his stake in E&O to 21% as a long-term positive for the company as it represented key management personnel’s “continued conviction and confidence” in the property developer.

“The increase in Tham’s stake in E&O should strengthen investors’ confidence in the long-term growth prospect for E&O especially with the all-important Phase 2 of STP2 project underway.

“We believe Tham will ensure the smooth execution of the STP2 project,” it said in a note.

STP2 stands for Seri Tanjung Pinang phase 2. STP is essentially a seafront development situated along Penang’s northeast coast and sits between George Town and the beaches of Batu Ferringhi.

The reclamation project STP2 has already begun dredging works after securing all the necessary approvals.

Aside from the reclamation of 760 acres under the project’s concession agreement, E&O is reclaiming a further 131 acres at its own cost along the Gurney Drive foreshore for the Penang state government.

Within this 131 acres, E&O has commissioned leading landscape designers and architects to present a conceptual masterplan for a new seafront promenade, recreational destination and park for the public, known as “Gurney Wharf”.

MIDF is giving STP2 a value of some RM4.6bil, which contributes to the research houses estimated revised net asset value (RNAV) of RM4.96 per E&O share.

Apart from Tham raising his stake in E&O, significant management changes had also been announced in the company.

Eric Chan, who has served as deputy managing director from 2011, will be leaving the company in August for personal reasons.

Tham has been redesignated from executive deputy chairman effective July 2016, with seasoned banker Kok Tuck Cheong (T.C Kok) taking over the post of managing director.

On the changes, Tham said they were due to Chan’s decision to vacate his post.

“The rest of the very experienced senior management team who has been with me for a long time, have chosen to remain to support me as we continue to steer the company forward,” he said in the email to StarBiz.

Moving forward, Tham said he wanted to exercise discipline in maintaining a healthy cashflow with prudent gearing management to enhance shareholders’ return, while remaining focused on implementing the company’s development projects.

“Coupled with the support of the existing experienced and capable senior management, I believe that E&O will be able to weather the local and global market challenges and at the same time build up resources when the recovery takes place,” he added.

The stock rose five sen yesterday to close at RM1.64 with 1.43 million shares traded.