KUALA LUMPUR: AmResearch has maintained its Buy call on Eastern & Oriental (E&O) with a fair value of RM3.82 a shares following the enlarged share base to account for the bonus issue and dilution from warrants.
In a note on Thursday, the research house said E&O had clarified market concerns about its balance sheet and gearing level post the sizeable acquisitions of Landmark House and Thames Tower in London.
"Gearing level will increase to 0.6 times from 1HFY15’s 0.5 times.
"Management clarified that Landmark House and Thames Tower are part of its plan to form a base in the UK for all its London properties including Princess House and Esca House.
"This would be done either through a listed entity in the UK or by roping in a strategic partner within the next 12 months," it said.
The research house added such a move would transfer all of E&O’s debt arising from the London properties to the UK-listed entity or joint venture.
Any future acquisitions in London will be undertaken by this new platform and not E&O itself.
"We expect share price rerating cycle to start once the reclamation tender is given, which is expected by end-March. E&O has shortlisted seven international contractors," it said.
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