Orient ... Apr10

Its auto division – once the bread and butter business – is dwindling. It had sold its stake in Hyundai franchise to Sime Darby for RM19.8 million cash. After the sale, Oriental still retains its dealership for Hyundai cars.

Its other interests in the auto sector are a 15% stake in Honda Malaysia Sdn Bhd and a car assembly plant in Tampoi, Johor (which assembles China margues such as Cherry and Berjaya ChangAn).

Without a franchise, it is apparent that the auto related operations are beginning to contribute less to the group’s bottom line. This inevitably puts pressure in management to grow its plantation and property development business.

It has involved in property development for many years but it only ventured into oil palm plantation in 2002 in a bid to diversify the group’s earnings stream.

Due to its conservative strategy, the group’s property and plantation businesses have not grown at a fast pace over the last few years. But the global financial crisis may present more opportunities for Oriental, which sits on a net cash of RM1.44 billion as at March 31, 2009. With a health balance sheet, the group is in a strong position to scoop up cheap plantation assets and development landbank or properties.

For 1Q2009, its property development had become the largest earnings contributor to the group, accounting for 29.7% of its group’s operating profit. This was followed by auto, plantation, investment holdings and resorts, and plastic products manufacturing.

It has a net cash holdings of RM1.44 billion or RM2.79 a share. The cash reserves currently made up of a sizeable portion of the group’s NAV of RM3.64 billion (equivalent to its shareholders’ fund) or RM7.04 per share, as at March 31, 2009.

Oriental has development landbank in Penang and the Klang Valley acquired many years ago, that have not been revalued and are still carried at cost.

It owns a 24 acre plot of vacant freehold land in Mukim Paya Terubong, Penang and still carried a net book value of RM300000.00. It also owns 39.3 acres of vacant freehold land in Tanjung Bungah, Penang which carried at a NBV of RM13.1 million.