E&O delaying launch of Penang condo project

Eastern & Oriental Bhd (E&O), which is in the midst of reviewing its property development launches amid the current economic slowdown, will delay the launch of the first phase of the Seri Tanjung Pinang condominiums in Penang.

The first phase, comprising four towers of seaside condominiums with one, two and three-bedroom units and with a gross development value (GDV) of about RM1bil, was to be launched during the group’s current financial year ending March 31, 2009 (FY09). But the targeted launch date has since been pushed to the third quarter of next year.

Executive director Eric Chan Kok Leong said the group was reviewing its launch strategies after monitoring the local market sentiment and global financial conditions.

“Economic slowdown is inevitable and will indeed impact bottom line, but our fundamentals remain solid.

“It is important now for the E&O group to conduct business in a more conservative mode, which includes reviewing certain development launches and proactively assessing product offerings to suit the times, such as providing smaller-sized units for greater market acceptance,” he said in an e-mail interview.

The group, however, would be forging ahead with the launch of its St Mary’s serviced apartments, targeted for the fourth quarter of FY09.

The project, sited in the heart of Kuala Lumpur’s central business district, consists of three blocks of 28-storey luxurious serviced apartments on 4.13 acres and has a GDV of RM1bil.

Chan said the project was in line with E&O’s focused business strategy of building premier properties in prime locations (10 to 15km radius of the Kuala Lumpur city centre in the Klang Valley) and which had the potential to further enhance the group’s brand reputation in the property landscape.

Nevertheless, Chan remains positive on the outlook for the country’s property sector.

“We expect the Government’s recently announced stimulus package for the property sector to have a positive impact in the long term notwithstanding the possibility of a downward pressure on demand for property caused by an expected deceleration in economic growth, employment concerns and a weak stock market performance.

“Amid this challenging environment, we anticipate that raw material prices will continue to normalise and hence ease the pressure on margins,” he said.

As for Penang, Chan said the state’s property landscape was undergoing rapid transformation aided by the population’s changing lifestyle and evolving market dynamics.

“Our positive outlook on the Penang property market is further supported by George Town’s Unesco World Heritage Site status which has rejuvenated efforts by the state government and property developers to boost the island’s position as a real-estate destination,” he said.

Although E&O’s net profit fell 96.8% to RM473,000 for the second quarter ended Sept 30 mainly due to lower contribution from the property division, an analyst with a local research house noted that the St Mary’s and Seri Tanjung Pinang condominium projects were in advanced ground/infrastructure works, implying immediate earnings recognition upon launch.

“E&O has prudently revised the timing of its new launches to meet market conditions.

“We continue to like the group for its premium branding and strong execution capabilities, which have enabled stable income stream from the Seri Tanjung Pinang project. We expect unbilled sales of RM191mil to be recognised over the next two years,” the analyst said.

Seri Tanjung Pinang, spanning over 980 acres, launched its first properties – in the form of Acacia Courtyard Terraces – in October 2005.

This was followed by the Avalon semi-detached homes in June 2006. Other phases include the Acacia semi-detached homes, some bungalow plots, Waterside serviced apartments and the Sea Villas detached homes.

By ELAINE ANG (The Star)

1 comment

December 8, 2008 at 3:22 PMAnonymous

It is good to delay a bit