On Tuesday, the company announced that the Penang state government had endorsed the masterplan of Seri Tanjung Pinang (STP) phase two.
By AmResearch
Buy (maintain)
Target price: RM3.90
AMRESEARCH has reaffirmed its “buy” rating on Eastern & Oriental Bhd (E&O) with an unchanged target price of RM3.90 per share.
On Tuesday, the company announced that the Penang state government had endorsed the masterplan of Seri Tanjung Pinang (STP) phase two.
With this, E&O would now emerge as the largest land owner of prime seafront land in Penang, said AmResearch.
The next step is the calling of tenders, which will be held by the second half of 2014, before reclamation works, which are expected to start in the fourth quarter.
AmResearch said the move by E&O managing director Datuk Terry Tham to increase his stake from 5% to 15% reaffirmed the management’s long-term commitment in ensuring the smooth execution of STP phase two.
It added that the endorsement was timely ahead of Temasek’s commitment to invest and develop Penang International Technology Park and Business Process Outsourcing Prime with Penang Development Corp.
In total, 891 acres will be reclaimed, comprising 131 acres along Gurney Drive and 760 acres at STP phase two. The breakeven reclamation costs is estimated at RM85 per sq ft.
The research house said it believed STP phase two would do well, underpinned by its strategic location, scarcity of land on Penang island, the firm establishment of STP phase one and improved accessibility.
The stock was currently trading at a steep 42% discount to its net asset value of RM4.61 per share, AmResearch added. - The Star
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