December 31, 2013

Kenanga sees Ho Hup's strong turnaround

Stock Name: HOHUP
Research House: KENANGAPrice Call: BUYTarget Price: 1.55

Kenanga Research expects a strong turnaround for Ho Hup Construction Company Bhd with forecasted net earnings of
RM17.1 million, RM106.3 million and RM146.8 million for financial years 2013, 2014 and 2015 respectively.

In a research note today, it said Ho Hup Construction is poised
to make a comeback after an extended break from the property and construction scene, following a lengthy corporate turnaround exercise.

" The financial regularisation exercise is near completion to uplift Ho Hup Construction from the PN17 status, which will enable the company to reap benefits from the development of its crown jewel, the 60-acre (approximately 24 hectares prime land in Bukit Jalil, Kuala Lumpur," it said.

It said the commercial freehold land of 10 acres (four hectares) belonging to Bukit Jalil Development Sdn Bhd's and 50 acres (20 hectares) of joint development land, is the main driver for the company's future earnings.

The research house said while Ho Hup Construction will have the sole development right to Bukit Jalil Development's land, a joint development agreement was signed between it and Malton Bhd for the joint development land.

Under the joint development agreement Ho Hup construction will be
entitled to 18 per cent of the gross development value (GDV) of RM2.1 billion or a minimum of RM220 million from Malton, as well as a cash advance of RM80 million.

It said currently, a revised master plan for the joint development land has been submitted and is pending approval, with the revised GDV estimated at more than RM4.0 billion from RM2.1 billion at present.

Kenanga Research has rated Ho Hup Construction as a "trading buy" with a fair value of RM1.55.-- Bernama