Monday, January 20, 2014

Ho Hup

Its share price seems to have yet to factor in the potential earnings for its 60 acres of prime land near Bkt Jalil.

The company expects to make a profit of at least rm500 million in coming years from Jan 2014 from a joint development project with Malton on 50 acres of the tract. However, it is trading at a market cap of only rm155 million way below the value of its land bank that could fetch an average price of rm300 psf.

There has been speculation that Datuk Thong Kok Khee, a substantial shareholder and non executive director of Ho Hup, has major plans for the company considering that his investment vehicle is Insas Plaza Sdn Bhd. There is talks that Thong may be interested in making Ho Hup a property and construction arm of Insas Bhd.

Ho Hup do not discount the possibility of future cooperation, provided that it benefits the company.

The PN17 company plans to apply for an up liftment from the status as early as the first quarter of 2014. It is currently on a roll of reporting four consecutive quarters of profits.

The company’s property development division looks more promising because of its prime land in Bukit Jalil, which Ho Hup owns through its wholly owned subsidiary, BJDSB.

Of the 60 acres, 10 acres will be exclusively developed by BJDSB while the rest is part of a joint development between Ho Hup and Malton. Ho Hup’s priority is developing the 10 acres, with the first phase slated to be launched later 2014.

However come wonder how the company would finance such capital intensive projects. The company’s cash and bank balances as at Sept 30 2013 stood at rm4.04 million. Combined with the rm8 million in gross proceeds from its rights issue to fund future projects, this is only amounts to rm124 million.

The development of the shops and offices as well as SOVO is self funded, that is with funds generated from the project itself. As for its JV project with Malton, Ho Hup does not need to raise capital as it will be financed by its partner.

For its construction division, the group has submitted bids for projects worth rm6 billion.

Its current order book stood at rn750 million.

With its Bukit Jalil development gaining traction, the company points out that its property development division may generate the bulk of its revenue in the coming years from Jan 2014.

It will be 70% to75% revenue contribution from property development and 25% to 30% from construction activities in the long term of three years.

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