Ho Hup set to return to the black

KUALA LUMPUR: Ho Hup Construction Co Bhd is set to be profitable this year, stemming eight years of losses, in large part because it had struck a deal with Malton Bhd to co-develop the 60 acres of land it owns in Bukit Jalil. 

Malton, controlled by Datuk Desmond Lim Siew Choon, is said to be building a regional mall there dubbed “Pavilion 2” after the property tycoon’s flagship Pavilion KL on Jalan Bukit Bintang, along with other properties. 

With 2 million sq ft of net lettable area (NLA), Pavilion 2 is even bigger than Pavilion KL’s 1.32 million sq ft and close to Mid Valley and the Gardens Mall’s combined 2.57 million sq ft. 

Malton is currently finalising its plans with City Hall for the 50-acre portion of the land it is entitled to. The company may kick-start launches in the first quarter of next year, according to Ho Hup executive director Derek Wong. 

The authorities have approved some nine to 10 million sq ft of NLA across the entire freehold Bukit Jalil development and a plot ratio of four, he told reporters following a shareholder’s meeting yesterday.  

The development order for Ho Hup’s 10 acres had been granted in February.  

Wong said the response to initial launches of shop offices on its slice of land were well-received, with 90% sold so far, generating RM260mil in total sales.  

Ho Hup’s 10 acres is divided into Parcel A, a 5.9-acre mixed project comprising offices, a hybrid mall and apartments above the mall, and Parcel B, which is purely residential.  

Parcel A had a gross development value (GDV) of close to RM400mil, Wong said. The potential value of Parcel B has not been finalised. 

Parcel B is slated to be launched in the first quarter of next year. Although the details have yet to be concluded, the condominium would tentatively be 15 to 18 storeys high, with units ranging from 600 sq ft to 1,000 sq ft and eight to 10 units per floor, Wong said. 

He added that Ho Hup did not plan to revalue its Bukit Jalil land, considered its most crucial asset, which is carried at a net book value of RM144.23mil. The land was acquired in 1995 at a cost of about RM30 per sq ft. 

Meanwhile, Wong said the firm was on track to complete its regularisation exercise by September or October, and would thereafter seek to exit the PN17 category for financially distressed companies by mid-next year.  

It had received the regulator’s nod for its restructuring on May 13 and can only apply to be uplifted from PN17 after showing two consecutive quarters of profit upon completion of the regularisation.  

The exercise involves a capital reduction, a rights issue of loan stocks with free detachable warrants and a scheme to repay its creditors.  

“Most of our creditors are agreeable to the debt restructuring. It’s a good deal because they don’t have to take a haircut and are getting either shares or cash.  

“Ho Hup has been profitable for three quarters in a row now. All our business units are performing up to expectations,” Wong said.  

The company was some years ago locked in a fight with Malton for the Bukit Jalil land, but both parties called a truce in July last year, carving out 50 acres to be developed by Malton and 10 acres by Ho Hup.  

Under a joint development agreement, Ho Hup, as the landowner, is entitled to 18% of the GDV from Malton's side of the project as well as a cash advance of RM80mil to repay debts.