The pundits have it. For the last month or so, the rumour mill was working overtime around Eastern & Oriental Bhd (E&O), the luxury lifestyle property developer, that a merger or acquisition was in the works.

First came the persistent speculation that SP Setia Bhd would merge with E&O, which was soon quashed by SP Setia. Then last week – quite out of the blue – Sime Darby Bhd announced it was acquiring a 30% stake in E&O for a significant premium over the latter’s share price.

In early August, E&O’s shares galloped to a three-year high of RM1.75 on the back of the SP Setia merger rumours, then came down again in line with the global stock slump. Yet, amid the broader market sell-down a few weeks later, its stock again saw aggressive trading, this time from its own shareholders who appeared to be upping their stake.

The notable ones included GK Goh Holdings Ltd, a substantial shareholder of E&O, and Datuk Azizan Abd Rahman, a director of E&O. According to shareholder changes filed with Bursa Malaysia, GK Goh had bought 1.25 million shares in three days, raising its stake to 11.6%, while Azizan acquired 100,000 shares.

The upward trend in E&O’s share price can be observed since Aug 24, from RM1.43 to Friday’s close of RM1.60, an 11.9% increase.

The deal with Sime Darby, which E&O called a “milestone” development, raised more than a few eyebrows about why such a high price was paid. The share sale agreement is for Sime Darby to acquire 273 million shares in E&O and 60 million irredeemable convertible secured loan stocks, representing a 30% equity interest, for RM766mil cash.

The sale price works out to RM2.30 per E&O share, which is a 58.6% premium over the stock’s pre-suspension price of RM1.45. Sime Darby came out in defence of its purchase, saying the RM2.30 was actually a 20% discount to E&O’s estimated realisable net asset value of RM3.2bil or RM2.88 per share.

Upon completion of the deal, slated for Sept 9, 2011, Sime Darby will be the single largest shareholder of E&O.

E&O’s largest project is the 980-acre Seri Tanjung Pinang seafront development, a coveted address in Penang.

To recap, the 30% block in E&O was acquired by Sime Darby from three substantial shareholders: E&O managing director and founding member Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh.

The trio’s collective 41.7% shareholding in E&O will be diluted to 11.5% post-acquisition.

Tham, previously the largest shareholder with 15.7%, will end up with a 5.1% stake while Azmi and Goh will have 3.5% and 2.9% respectively.

A sore point with analysts is the high price paid for E&O. TA Research said the price was 19 times E&O’s forecast earnings for 2012 and 1.85 times its price to book value based on consensus estimates. By comparison, the property sector has an average of 12 times forecast earnings for 2012 and 0.8 times price to book value.

Kenanga Research also noted that since Sime Darby was expected to equity account E&O’s earnings on an associate level, that would only translate to a meagre 0.6% increase to Sime Darby’s profits in 2012 and 2013.

It suggested that management might have been better off using the RM766mil to expand its plantation land or motor segment in China.

A local broker, however, had a more pragmatic view, saying that although Sime Darby was keen to venture into high-end development, it did not necessarily want to obtain everything at one go via a general offer, which would have been a much riskier proposition.

“Furthermore, E&O’s shares in the open market are quite fragmented and not very liquid, making the task of acquiring 30% quite cumbersome and time-consuming.

“By getting the substantial shareholders to agree on a share sale proper, Sime Darby avoided facing a hostile takeover situation,” she said.

In terms of mutual benefits, Kenanga pointed out that phase two of the Seri Tanjung Pinang development might have factored strongly in the deal.

The project, estimated to have a reclamation cost of between RM3.2bil and RM3.5bil and a gross development value of RM9bil to RM10bil, could do with the financial muscle of a company like Sime Darby.

SOURCE: The Star

PETALING JAYA: Analysts expect property loans to maintain their position as a key growth driver of credit expansion with some estimating them to grow between 10% and 12% this year due to the low interest rate environment and ample liquidity in the banking system.

While holding to this view, some feel the external environment, like the slowing US economy coupled with the sovereign debt crisis in the eurozone, could dampen demand for properties.

For the first seven months of this year, property loans remained the key growth driver, accounting for 40.6% of the banking system’s overall credit expansion, followed by working capital loans at 23.6%. Residential property loans currently accounted for about 27% of the system’s total loans.

RAM Ratings head of financial institution ratings Promod Dass told StarBiz that the credit environment to date had continued to be accommodative for borrowers with ample liquidity in the banking system and a stable economic environment. Coupled with attractive promotional packages offered by some developers, he said residential property loans had already shown a healthy 7.1% growth in the seven months to July (or 12.1% annualised), which was more or less at a similar pace compared with the overall total banking system’s year to date loan growth of 7.5%.

“We believe that the full year loan growth for residential property loans will be in the 10%-12% range although we are closely observing the sovereign problems still brewing in Europe as well as concerns on the US economy and the consequent impact on Malaysia’s economic growth stamina, which could affect consumer sentiment in property purchases,” he reckoned.

Dass said that while there was a slowdown in loan applications for residential mortgages in the few months after the implementation of the 70% loan-to-value cap on the third and subsequent house financing, the momentum had picked up again since March.

The move to curb the third and subsequent home financing was introduced by Bank Negara on Nov 2 last year to quell speculation on residential properties.

Alliance Bank Malaysia Bhd consumer banking head Ronnie Lim said he was bullish on property loans. He noted that in Malaysia, housing loans currently accounted for 50% (or RM255bil) of total household debt (RM510bil) and would continue to be one of the key growth drivers of retail credit expansion this year and in the near future.

“One of the main growth areas for properties is Klang Valley, which accounts for close to 60% to 65% of all property transactions. In addition, the population growth in Klang Valley is expected to reach 10 million by 2020 and the demand for residential property is expected to be fuelled by residents of Klang Valley whose average age is 34 years old.

“Coupled with the shortage of land in Klang Valley, demand will always out-strip supply. The economic growth and the low unemployment rate in the country is another catalyst for housing loan growth. The recent Economic Transformation Programme (ETP) announcement will further accelerate demand for residential properties as more affordable properties are being developed,’’ he said.

Lim said prices of properties in Malaysia were still one of the lowest in the region when compared with countries like Thailand, Hong Kong and Singapore. The industry’s total housing loan outstanding stood at RM255bil as of July 2011 compared with RM234bil in December 2010, he noted, adding that this represented a 14% annualised growth.

Given the positive environment and the above factors, Lim said the bank was confident the current growth rate could be maintained despite the recent global market unrest.

An MIDF Research banking analyst said property loans would hold up as a key growth driver of credit expansion this year as the persistent demand for property loans would be driven by low lending rates as well as the sustainable growth of the property market.
SOURCE: The Star

VISITORS to the Perfect Livin ’11 Home & Lifestyle Exhibition at the Penang International Sports Arena (PISA) can expect good deals and discounts on a wide range of home decor and home living products.

The one-stop solution, held until tomorrow, from 11am to 9pm, features more than 400 booths offering hot package deals for home innovation and decoration items, gifts for purchases and discounts.

Creative Novelties Marketing Holdings Sdn Bhd group managing director Datuk Adriana Law said this time around, exhibitors were offering competitive prices to attract a crowd of 80,000 visitors over the three-day event.

“Due to the overwhelming response from our previous exhibition in June, exhibitors will bring in more products, especially mattresses and high-quality landscaping products, to cater to demand,” she said.

She said the exhibition was separated into eight zones to enable visitors to get the best options in improving their home with the latest audio-visual systems and gadgets, security systems, kitchen appliances and unique landscape concepts.

There will be a talk titled ‘Feng Shui for Wealth & Prosperity’ by Grand Master Yap Cheng Hai today from 2pm until 5pm, and children’s colouring contests today and tomorrow.

Admission to the exhibition is free and visitors stand a chance to win a 42-inch Panasonic LCD TV per day.

Visitors who spend RM1,000 and above with accumulated receipts will also receive a gift.

Those who spend RM100 stand a chance to win daily prizes, including Napure mattress, wallpaper or a fibreglass water feature in the ‘Purchase & Win’ contest.

The first 1,000 visitors to click ‘like’ on Perfect Livin’s Facebook page will be given a Tupperware snack cup on a first-come-first-served basis, and will also stand a chance to win a three-day-two-night trip for two to Bangkok.

For details, visit www.perfectlivin.com or connect with the event on Facebook or Twitter at perfectlivin.

Source: The Star

KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB) says its joint venture with Multi-Purpose Holdings Bhd (MPHB) will open new avenues for the company for land development.

BRDB is seeking opportunities to diversify its development portfolio to grow itself, said its chief marketing officer K.C. Chong.

In April, BRDB's wholly-owned units, Pinggir Mentari Sdn Bhd, Orion Vibrant Sdn Bhd and Magna Senandung Sdn Bhd, signed three separate joint venture agreements with subsidiaries of MPHB – Tibanis Sdn Bhd, Magnum.Com Sdn Bhd and Mimaland Bhd.

The joint venture is centred on developing 268ha in Mimaland, Gombak; Rawang and Penang. It will be the first venture for BRDB in these locations.

BRDB has long been accredited with the establishment of Bukit Bandaraya in Bangsar, Kuala Lumpur. It also has projects in the Kuala Lumpur city centre and Johor.

The company's vision moving forward is to provide the unique Bangsar lifestyle in Rawang, Mimaland and Penang.

Chong told Business Times that the joint venture is working towards launching the projects, with an estimated gross development value of more than RM4.25 billion, after 2012.

"The projects are still in the planning stages. Penang would be our most expensive development. We plan to build luxury houses and condominiums, worth more than RM1 million each," Chong said.

In Rawang, the joint venture is planning to build mixed residential properties and a commercial hub.

Chong said the development planned for Mimaland will be the most exciting as it would change the area's landscape.

Mimaland was once a famous recreation park. It opened in 1975 and ceased operations in 1993, following some unresolved plans for expansion.

The joint venture project will include eco-friendly hillside, courtyard and waterfront landed homes set among natural waterways, valleys and water bodies with mature forest views.

Chong said properties at its Rawang and Mimaland projects will start from RM500,000.

SOURCE: Business Times

( This project is now known as Setia Sky 8 @ Setia Pearl Island )

The Wave, an upcoming condominium development at Setia Peral Island. This new development comprises 3 blocks with unit size ranging from 1,100 square feet to 2,000 square feet with full condo’s facilities.

Property Project : The Wave @ Setia Pearl Island
Location : Setia Pearl Island, Sungai Ara, Penang
Property Type : Condominium
Built-up Area: 1,100 sq.ft. onwards
Total Units : 539
Land Tenure: Freehold
Developer : SP Setia