Published on 30 August 2012
RAM Ratings has reaffirmed the respective long- and
short-term enhanced ratings of E&O Property (Penang) Sdn Bhd’s (“EOPP” or
“the Company”) RM350 million Bank-Guaranteed Commercial Papers/Medium-Term
Notes Programme (CP/MTN) at AAA(bg) and P1(bg); the long-term rating has a
stable outlook. The long-term rating reflects the unconditional and irrevocable
bank guarantee extended by Malayan Banking Berhad (Maybank) (rated
AAA/Stable/P1 by RAM Ratings) while the short-term rating reflects the
unconditional and irrevocable bank guarantee extended by Maybank and Affin Bank
Berhad (rated A1/Stable/P1 by RAM Ratings). The bank guarantees enhance the
credit standing of the CP/MTN beyond EOPP’s stand-alone credit profile.
EOPP is the developer of Phase 1 of the Seri Tanjung Pinang
project (STP) – a mixed development spanning 240 acres of reclaimed land in
Tanjung Tokong, Penang, with a gross development value of over RM4 billion. The
Company is 95.6%-held by E&O Property Development Berhad, which is in turn
a wholly-owned subsidiary of listed property developer – Eastern & Oriental
Berhad (E&O Berhad or the Group). As at mid-May 2012, EOPP had sold more
than RM2 billion worth of properties since its maiden launch in October 2005;
about RM634.76 million remained unbilled.
Excluding the bank guarantees, EOPP’s stand-alone credit
fundamentals are supported by the E&O Berhad’s established track record and
strong branding within the local high-end property sector. This, coupled with
STP’s mature status and strategic location, i.e. close proximity to Gurney Drive,
are expected to augur well for the Company. As EOPP is an integral part of the
Group, we believe it will continue to receive parental support should the need
arise. These factors are balanced against the Company’s single-project
concentration risk, on the backdrop of intensifying competitive pressures in
Penang, as well as softer buying sentiments within the local property sector.
While EOPP’s balance sheet is fairly conservative currently, it could
potentially gear up to fund Phase 2 of STP.
Media contact
Michael Ti
(603) 7628 1015
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