sign9.14Teho International executive chairman and CEO Lim See Hoe (left) with Dato Eric Cheng, CEO of the ECG Group. Photo: CompanyTEHO INTERNATIONAL is well known in certain segments of the marine and offshore oil & gas industry but it is set to make waves in Cambodia with a "substantial" project development there.

While it has local partners in developing the project (see announcement of MOU in Aug 2104), it will rope in a well-known Singapore company, ECG Property Services, to market the mixed-development property  to investors in Singapore and the region.

ECG has a wide suite of other real-estate services, including valuation and property management -- and big ambitions to have a presence in as many as 35 cities from which it can market properties, including the Cambodian project, to investors.

Last week, Teho's wholly-owned property subsidiary, Teho Development, signed a non-binding letter of intent with three vendors of ECG, including Dato Eric Cheng, for the proposed sale and purchase of ECG Property Services. 

Tehochart9.14Teho (23 cents) trades at a trailing PE of 10.2 and a dividend yield of 2.22%. Its market cap: S$44 million. Chart: Yahoo!The consideration is S$17 million, of which $5 million will be in cash and the remainder in shares of Teho priced at 28 cents a share.

"Why we decided to acquire ECG -- it's tied closely to the Cambodian project which will be quite substantial for us. With ECG under our umbrella, straight away we have a strong marketing arm for the project," said Teho's executive chairman and CEO, Mr Lim See Hoe at a briefing last week.

Beyond the Cambodian project which may be launched next year, Mr Lim added that ECG will have access to funds through the listed company to realise its current ambition to expand its presence to 35 cities.  

In Taiwan. ECG aims have a presence in 7-8 cities while in Malaysia, ECG would like to be rooted in a few cities beyond Kuala Lumpur alone, said Dato Eric Cheng, CEO of the ECG Group.

ericcheng9.14Dato Eric Cheng: "As a private company for the last 11 years, we have built this business to a certain height. The only way I feel we can achieve a breakthrough would be to get ourselves listed or be acquired." Photo by Leong Chan Teik
"We want to have our own offices and own staff there. If you wish to buy a property in Thailand from us, we have our own ECG agents to serve you, to show you the product," said Dato Cheng.

ECG derives some 60% of its revenue from overseas now, up from 30% previously when the Singapore property market was doing well.

"There's a lot of growth outside of Singapore. Our main overseas contributors are Malaysia and Taiwan and they are our main focus now." 

He said that Japanese properties are favourites of investors in Taiwan while UK properties have sold well in Malaysia.

Asked about the Cambodian venture, Dato Cheng said "it is in a prime location and it will be one of the biggest projects in Cambodia."  It is a mixed development comprising residential and commercial units.

And the Cambodian market is active, attracting investors from the region such as Koreans, Japanese and Taiwanese. 

The proposed acquisition of ECG marks Teho’s second partnership with Dato' Eric Cheng after the completion of the S$12.3 million acquisition of TIEC Holdings in May 2014, which develops Singapore properties. (See details at: TEHO'S 2nd property deal in 6 months; Geo Energy triples coal reserves)
Explaining Teho's diversification into the property business, Mr Lim said this would counter the cyclical nature of the marine and oil & gas industry. Teho has seen its business impacted by a sharp downturn in the shipping industry since the global financial crisis of 2008.

Will Teho's new property business eventually overshadow its marine and oil & gas business? The latter raked in S$55 million in revenue in the last financial year versus S$5.1 million from property development (1-month's contribution post-acquisition of TIEC)?  

Teho reported a 42.5% growth in net profit to S$3.4 milion for the year ended June 2014.

Mr Lim declined to reveal the financial figures of ECG but said that "we want to grow both pillars. Going forward, we have strong property plans in Cambodia and possibly other countries. 

"But we are still looking for M&A opportunities and growth in the marine and oil & gas sectors. We are not restricting ourselves, and we want to seize opportunities when we see them." 
For more  information, see press release.


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