New members: Abdul (left) and Bakke now sit on the board of E&O.
PETALING JAYA: Sime Darby Bhd's move to appoint two of its top executives - president and group chief executive Datuk Mohd Bakke Salleh and group chief operating officer Datuk Abdul Wahab Maskan - to board positions at Eastern & Oriental Bhd (E&O) has elicited both positive and neutral responses from analysts.
E&O told Bursa Malaysia in a filing on Tuesday that it was appointing Bakke and Wahab as non-independent and non-executive directors. It also announced the resignation of non-independent and non-executive director Thomas Teo Liang Huat.
A local bank-backed analyst said it had been expected that Sime Darby would place board members at E&O following its purchase of a 30% stake in the latter in September.
“The board representation will let Sime Darby in on what's going on at E&O and learn from it, as well as work towards possible collaborations, as was previously indicated.”
The analyst added that Sime Darby was not likely to make any major changes in E&O at the moment. “There is no catalyst for that to happen.”
Another analyst said he was neutral on the news, adding: “It (the board appointments) is not surprising, what would be surprising is if they did not take board seats.”
StarBiz had previously reported that Sime Darby would appoint two people to E&O's board after it bought into the Penang-based niche property developer for RM766mil or RM2.30 per share from Tan Sri Wan Azmi Hamzah, Singapore-listed GK Goh Holdings and E&O managing director Datuk Terry Tham.
The acquisition, which sparked discontent among minority shareholders for the 60% premium-to-market price paid to the three parties for their shares, prompted a review by the Securities Commission into whether there was collusion involved in the share sale and if Sime Darby had to make a mandatory general offer for the rest of E&O's shares, but the regulator ruled otherwise.
Sime Darby, now E&O's single largest shareholder, also signed a three-year agreement with the latter to cooperate in three areas - sharing knowledge and expertise, leveraging on each other's core competencies, and jointly exploiting economic opportunities.
While Sime Darby has reiterated that it did not buy into E&O with the intent to merge, Bakke had told StarBiz that he would not rule out a general offer and might make one if it was appropriate.
Previously, the ECM Libra Financial Group Bhd, which currently has a 6.4% stake in E&O according to Bloomberg, had attempted to get two of its representatives - Mahadzir Azizan and Leong Kam Weng - to the latter's board during its AGM but failed to do so after shareholders voted in opposition.
Meanwhile, E&O has posted a 172.1% surge in net profit for its second quarter ended Sept 30 to RM13.8mil from RM5.1mil in the previous corresponding period on the back of 25.5% higher revenue to RM82.6mil from RM65.8mil.
The developer attributed its strong results to higher revenue from the Seri Tanjung Pinang project as well as the hospitality and restaurants division, but said it would adopt a “cautiously optimistic” outlook against the present economic uncertainties.
It added that earnings could be boosted by its property development projects such as the St. Mary Residences in Kuala Lumpur, Quayside Seafront Resort Condominiums at Seri Tanjung Pinang and new launches in Penang.
E&O's first board meeting with Sime Darby's representatives in attendance was held yesterday.
By The Star
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