PETALING JAYA: The recent revamp of the board at Eastern & Oriental Bhd (E&O), with the redesignation of Datuk Tee Eng Ho as executive chairman, is expected to enhance value-creation for the property development company.
Under Eng Ho’s leadership, the company will focus on better product offerings and cost efficiency. However, his future plans for E&O were expected to take time to translate into meaningful earnings.
Meanwhile, the boardroom change at E&O is expected to benefit construction outfit Kerjaya Prospek Group Bhd, in which Eng Ho is a co-founder and non-executive chairman, as well as the group’s property unit, Kerjaya Prospek Property Bhd (KPPB).
Through his private vehicle Amazing Parade Sdn Bhd, Eng Ho now has an effective majority stake of 55.2% in E&O as of May 11. This followed a conditional mandatory general offer by Amazing Parade early this month for E&O shares at 60 sen apiece.
Eng Ho also owns a 71.2% stake in Kerjaya Prospek via Amazing Parade and Egovision Sdn Bhd, as well as a 56.4% stake in KPPB via Javawana Sdn Bhd.
Eng Ho was executive chairman at Kerjaya Prospek before being redesignated as non-executive chairman last week, following his new appointment in E&O.
The revamp at Kerjaya Prospek saw his brother Tee Eng Tiong being made chief executive officer and executive director at the company.
According to RHB Research, while Eng Ho will not oversee the overall day-to-day operations at Kerjaya Prospek group, he is expected to continue guiding the board.
“Following Eng Ho’s appointment as the new executive chairman of E&O, we believe further value-creation for both entities could be realised. This takes into account Kerjaya Prospek group’s strength in value-engineering and construction experience, which could help property developers such as E&O achieve greater cost-efficiency and offer higher-quality products, ” the brokerage said in its report yesterday.
Separately, at a recent briefing by E&O in conjunction with the boardroom changes, Eng Ho was quoted as saying that E&O would roll out better product offerings and focus on cost-efficiency in the future, in order to cater to market demand.
CGS-CIMB Research said its domestic property activities at E&O (Penang and Klang Valley projects) would likely pick up with Eng Ho’s appointment.
“We gather earnings for the financial year ending March 31,2023 (FY23) should be better with more aggressive launches of projects, while FY22’s earnings outlook remains uncertain due to the ongoing Covid-19 outbreak, ” the brokerage said in its report.
RHB Research noted that the “value add” that Eng Ho could bring into E&O would likely take time to translate into meaningful earnings. Nevertheless, his emergence as a major shareholder in E&O should help strengthen the company’s financial position given the solid balance sheets that Kerjaya Prospek and KPPB have.
On potential conflict of interest, Eng Ho said there would still be open or invited tenders for all property construction jobs and infrastructure works at Seri Tanjung Pinang 2A.
“In case there are no other bidders participating, we believe Kerjaya Prospek will end up as the sole contractor for all E&O’s projects going forward since the former has already been doing building works for the latter, ” RHB Research said.
Last week, Eng Ho ruled out a merger between E&O and any Kerjaya Prospek group of companies in the near term. However, such a possibility could be reconsidered in the next five or 10 years.
RHB Research pointed out that Kerjaya Prospek’s outstanding orders of RM3.5bil should support the group’s future construction income, while contributions from its property unit should turn meaningful, with a few launches planned for the year.
Given its strength in job replenishment and the potential pick-up in property sales, RHB Research said Kerjaya Prospek could see its earnings growth at a compounded annual rate of 30% over the next three years.