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Ho Hup targets 3Q to complete revamp

KUALA LUMPUR: Beleaguered Ho Hup Construction Company Bhd aims to complete its restructuring exercise by the third quarter (3Q), according to its board.

This is notwithstanding the outcome of its dispute with Malton Bhd concerning the joint development agreement (JDA) of a 60-acre (24 hectares) plot in Bukit Jalil, which is Ho Hup's crown jewel.

At its EGM on Thursday, Feb 10, the board declined comment on speculation that Ho Hup is negotiating with Malton to alter the terms of the JDA and may reach an out of court settlement.

To recap, Ho Hup filed a suit in April 2010 seeking the court to declare that the JDA entered into between its 70%-owned subsidiary Bukit Jalil Development Sdn Bhd (BJD) and Pioneer Heaven Sdn Bhd (PHSB), a unit of Malton, is void.

It was reported that the board was unhappy with the terms of the JDA, which was approved by the previous board. Under the agreement, PHSB would be the project's sole financier and BJD would be entitled to a 17% share of the project's gross development value (GDV) or a minimum of RM265 million. The freehold land would be developed into a mixed and commercial development.

"The value of this land (60 acres in Bukit Jalil), even through outright sale, is considerably higher than the debts of the group," said Ho Hup executive director Derek Wong. "The board has not taken any decisions (should there be an outcome from the court), although we may plan to dispose or develop the land, or enter into an alliance with more favourable terms."

Speaking to the press after the EGM, Wong said Ho Hup's restructuring exercise would include the acquisition of new assets from its white knight investor as well as a corporate exercise. He added that the company still needs to carry out capital reduction as part of the restructuring, although the timing and amount have yet to be finalised.

"Following this, Ho Hup will focus on property development, as well as growing the existing ready-mix concrete business and niche construction works for which we still have the in-house expertise," he said. "Going forward, we would like property development to contribute more than 50% of revenue."

Last November, Ho Hup, a Practice Note 17 (PN17) company, announced the emergence of a white knight investor in Plenitude Frontier Sdn Bhd, of which Raymond Tan is a majority shareholder. Tan is an independent non-executive director of IJM Land Bhd and PanGlobal Bhd as well as CEO of Capital Land Sdn Bhd.

In what could be seen as a reverse takeover, Ho Hup proposed to acquire from Plenitude Frontier two property development firms — Fivestar Development (Puchong) Sdn Bhd and Kolektra Recreation Sdn Bhd —  for a total of RM46.8 million via the issuance of new shares, which translate into about a 31.45% stake in the enlarged share capital of Ho Hup. Fivestar and Kolektra own landbanks in Puchong.

"The exercise will benefit both parties as we would be able to leverage on Tan's experience while strengthening Ho Hup's balance sheet," said Ho Hup's CFO Ivan Oh.

Shareholders at the EGM approved the disposal by BJD of a 3.32-acre site in Bukit Jalil to Bayu Melati Sdn Bhd for RM9.55 million.

There are currently no activities in Ho Hup's construction and property divisions, except for its ready-mix concrete business that is still operational.

According to Wong, the company plans to expand its pre-mix business in the long term, with plans to erect new plants in addition to its three plants in Meru, Bukit Jalil and Terengganu.

He added that the company was in the midst of seeking a three-month extension from Bursa Malaysia Securities for its PN17 regularisation plan to May 4, 2011.

Ho Hup closed 3.5 sen lower at 53.5 sen on Thursday, with 275,000 shares traded.

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