Ho Hup profit almost halves in 2Q amid higher finance cost, lower revenue

KUALA LUMPUR (Aug 29): Ho Hup Construction Company Bhd's net profit for the second quarter ended June 30, 2017 (2QFY17) fell 47% year-on-year to RM10.82 million from RM20.35 million, due to higher finance costs amid lower revenue.

A filing with Bursa Malaysia yesterday showed Ho Hup's topline for the quarter under review shrank 30% to RM33.44 million from RM47.52 million, mainly on lower contribution from its construction and building material divisions.

Ho Hup said its construction division contributed less to the quarter due to the completion of several projects.

The higher finance costs registered were mainly attributable to the full drawdown of a term loan for the construction of a bus terminal in Kota Kinabalu, a long-term property financing facility to finance the Ho Hup Tower, and additional short-term loans and overdraft lines for working capital, which amounted to RM242.6 million.

For the first half of the year (1HFY17), net profit declined 41% y-o-y to RM23.22 million from RM39.43 million, as revenue retreated 46% to RM68.99 million from RM128.59 million due to higher finance cost incurred in the period for additional financing obtained.

On prospects, Ho Hup said its construction business segment is actively bidding for contracts focusing on infrastructure related projects, with a current tender book and outstanding order book figure of RM4.7 billion and RM385 million respectively.

For its building material division, the group noted that there will be improvement once infrastructural work under the East Coast Railway Line (ECRL) and High Speed Rail (HSR) is launched, as these projects may require raw material from the group's strategically located quarries.

The group remains cautious for its property development division, and will only proceed with launches of its Kota Kinabalu, Kulai and Bukit Jalil projects after pre-sales information shows improvement in market sentiment.

Ho Hup closed unchanged yesterday at 72.5 sen, with a market capitalisation of RM271.78 million. — theedgemarkets.com

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