GEORGE TOWN: Eastern & Oriental Bhd (E&O) expects the Penang property sector to contribute 50% to its total annual sales of RM1 billion to RM1.5 billion from its various projects nationwide.

Its general manager (Penang segment) Christina Lau said this is based on the group’s three-year business plan target till 2016.

Lau said Penang had contributed 50% to the group in its financial year ended March 31, 2015 (FY15) and a repeat performance is expected for FY16.

“Penang had contributed 50% to E&O’s total revenue in FY15, making it a major driver for the group,” she said, adding that the group’s unbilled sales for the state stood at RM868 million as at March 31, 2015.

Responding to digitaledge DAILY via email, Lau said the forecast is based on the roll-out of current launches, the difference in timing of launches and the maturity of property development projects.

She noted that the pattern evolves from year to year as E&O (fundamental: 1.3; valuation: 1.4) simultaneously nurtures its three other key growth engines in Kuala Lumpur, Iskandar Malaysia in Johor, and the United Kingdom.

Asked about the remaining landbank on the first phase of Seri Tanjung Pinang (STP1) reclamation, she said there are about 20 acres (8.09ha) left but development plans have not been firmed up yet.

STP1 measuring 240 acres was reclaimed in 2007 with 110 acres handed over to the state government as part of E&O’s contractual obligation to the former.

Reclamation for the remaining 760 acres under STP2 is expected to be completed by the end of this year.

In its first quarter ended June 30, 2015 (1QFY16), E&O posted a 22.6% rise in net profit to RM23.25 million from a year ago, despite lower revenue of RM68.9 million compared with RM129.7 million.

The drop in revenue was mainly due to the 60% decline in revenue from the property segment in 1QFY15 to RM41.958 million from RM102.71 million a year ago.

The decline in revenue was attributed to lower revenue recognition following the completion of two blocks of the Quayside Andaman Condominium in STP1 in the previous financial year, said E&O in its financial statements.

Meanwhile, Lau pointed out that the estimated gross development value (GDV) for ongoing projects comprising Andaman Series and The Tamarind, and upcoming launches in Penang, amounted to RM2.6 billion.

“To date, we have achieved close to 90% sales for Tower 1A (of The Tamarind) while Tower 1B has recorded over 3,000 registrations. The 90% sales for Tower 1A with 552 units translates to approximately RM440 million,” she said, adding that the towers are expected to be completed in May 2019.

The Tamarind, a 6.9-acre freehold high-rise development with an estimated GDV of RM900 million, features two blocks of 33-storey buildings comprising a total of 1,104 units of condominiums.

Apart from 18 East at Andaman, which is part of the Andaman Series launched in January this year, E&O expects to launch Amaris comprising 29 luxurious terrace houses by the sea with a GDV of RM100 million, and 20 units of link villas with a GDV of about RM80 million in STP1, before the end of 2015.

She added that despite the soft market conditions, E&O’s strong brand presence in Penang was supported by proper planning, garnering positive response as seen with the Tamarind development.

She expressed confidence in the long-term prospects of Penang, backed by its position as an industrialised state that successfully attracted foreign direct investments.

"Our existing growth engines across Penang, KL and Iskandar should keep us busy for the next 10 to15 years at the least while we remain open for new strategic opportunities that are aligned with positioning.

“Barring any unforeseen circumstances, we expect the property market to recover, stabilise and grow over the medium- to long-term as we roll out our new projects across the Kuala Lumpur City Centre, Iskandar Malaysia, Penang and London," she said.

This article first appeared in digitaledge Daily, on September 7, 2015.