Ho Hup trims FY16 profit growth target

KUALA LUMPUR (May 24): Ho Hup Construction Company Bhd, which saw its earnings slip 5% in the first quarter ended March 31, 2016 (1QFY16), has trimmed its profit after tax (PAT) growth target to between 15% and 20% for FY16, in view of the continued slowdown in the property market. It had previously targeted a rise of between 20% and 25%.

“Given the slowdown in the property market, we are not slowing down our property launches, but we are being a little bit more cautious,” said Ho Hup chief executive officer Datuk Derek Wong Kit Leong after the company’s annual general meeting yesterday.

“We still have balance land in Bukit Jalil and we are timing the launch for that. We are readjusting the timing of our launches,” he added.

In FY15, Ho Hup’s net profit gained 8.15% to RM71.11 million, mainly due to the turnaround of its concrete mix division.

In 1QFY16, Ho Hup’s net profit declined to RM19.08 million from RM20.09 million a year ago, on additional financing costs incurred for corporate acquisitions and costs of funding new projects.

Quarterly revenue, meanwhile, declined 7.8% to RM81.08 million from RM87.96 million on no progress billings in its joint-venture (JV) project in Bukit Jalil City and the Tower C JV with Gemilang Eramaju Sdn Bhd.

This year, Wong said, Ho Hup plans to launch serviced apartments and two floors of retail space in Kota Kinabalu, worth RM500 million in gross development value (GDV). It is also planning a hotel there that carries RM780 million in GDV.

Wong said Ho Hup had signed a letter of intent with an international hotel group to operate the hotel. It plans to sign a hotel management agreement with the group by early July, and start construction of the hotel by end-2016 to complete by 2019.

The group is also targeting to launch another residential project with a GDV of RM400 million in Bukit Jalil next year, said Wong, but declined to reveal more.

On the progress of the Pavilion Bukit Jalil shopping mall, Wong said it should be completed by 2019. The mall is one of the main components of the Bukit Jalil City development project that Ho Hup is jointly undertaking with Malton Bhd.

Meanwhile, Ho Hup is gearing up for another mixed development project on its 429 acres (173.61ha) of leasehold land in Kulai, Johor, which carries a GDV of RM2 billion and launches should start in 2017.

The company has no plans to increase its land bank currently, which stands at 494 acres. As for its construction division, the company’s tender book stands at RM3 billion now, while its order book is at RM600 million.

Wong also shared that Ho Hup’s newly acquired granite quarrying business in Melaka should begin operation in June or July, and is targeting some reclamation works in the state.

On dividends, he said shareholders can look to receive dividends next year, as the company is in the midst of bolstering its balance sheet.

“We are calling for a rights issue to strengthen our balance sheet. We expect to start declaring dividends in FY17,” he added.

Yesterday, shareholders approved Ho Hup’s proposal to undertake a one-for-five rights issues and redeemable preference shares to raise up to RM136.22 million for project funding.

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This article first appeared in The Edge Financial Daily, on May 24, 2016. Subscribe to The Edge Financial Daily here.