For the full year, the group saw a RM37.7mil net loss versus a RM128.9mil net profit in FY08, while revenue also fell to RM302.6mil against RM516.4mil previously.
A lower contribution from the property division, as well as provision for impairment loss on investments of RM10.24mil and loss of RM19.976mil on disposal of 50% stake and preference shares in associate Puncak Madu Sdn Bhd to Selangor Properties Bhd were the reasons for the lower full-year earnings, the group said in a statement. The property division accounted for more than 80% of total revenue in FY09.
While the company slipped into the red in FY09, it is looking at strengthening its balance sheet and reducing its gearing with a rights issue that is expected to raise RM200mil.
E&O executive director Eric Chan told StarBiz the severity and suddenness of the economic downturn in 2008 necessitated “pre-emptive balance sheet management strategies”.
E&O announced yesterday a renounceable rights issue of irredeemable convertible secured loan stocks (ICSLS) 2009/2019 on the basis of one new ICSLS for every two shares held. The nominal value 10-year ICSLS of 65 sen each come with a coupon of 8% per annum.
E&O has the option to call for conversion of the ICSLS into new E&O shares after two years of issuance and if its share price exceeds RM1.
E&O’s share price has been penalised since its merger with and delisting in July/August last year of E&O Property Development Bhd which left it with high gearing.
Chan said the rights issue was only part of a two-pronged approach to address the gearing concerns and funding needs.
In total, the group aims to raise RM500mil. In addition to the RM200mil from the ICSLS issue, E&O is raising another RM300mil from the disposal of non-strategic landbank.
“This programme started in January. To-date, we have raised just under RM100mil from our asset disposal including from the unwinding of the joint venture with Selangor Properties,” Chan said.
At present, E&O’s gearing is high at 0.8 times but the group’s loans are not due immediately having been extended to 2014.
According to Chan, with the RM200mil from the ICSLS scheme, E&O’s gearing falls to 0.46 times.
A further RM300mil from the disposal of non-strategic landbanks would bring gearing to a low 0.16 times.
Together with new property launches that would generate even more cashflow, gearing would be slashed to a negligible level in two to three years, said Chan.
By The Star (by Loong Tse Min)
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