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Rebuilding Ho Hup

When City & Country caught up with Lim Ching Choy last week, it was at a hotel lounge as his office was under renovation. He obligingly posed for a few quick photographs  before proceeding to bare his thoughts on a new chapter of his corporate journey.
Lim was a former CEO of Mah Sing Bhd before he moved on to builder-cum-property developer Magna Prima Bhd, once loss making but which has since returned to the black. Before that, he had chalked up two decades in the banking industry.

Two weeks ago, the 48-year-old Lim reported for work at financially troubled Ho Hup Construction Co Bhd, one of the country’s oldest construction firms. As group managing director, Lim’s priority, obviously, is to turn around the PN17 company that is listed on the Main Board.

Lim aims to get the PN17 status lifted by year’s end. To do this, he is beefing up the company’s property development division, which has been tasked with taking the lead in quickly generating profit and cash flow, the lifeline of a company.

Ho Hup, which has been around for 49 years, is not without its gems. It owns a 60-acre commercial tract within the freehold Bandar Bukit Jalil township in Kuala Lumpur which, according to Lim, has a potential gross development value (GDV) of some RM1.75 billion over the next 8 to 10 years.

Planned for this site is the Jalil City development featuring 176 units of lifestyle shopoffices, a hypermarket, a lifestyle central piazza with commercial lots, 1,800 serviced apartments, a Grade A office tower and a condo hotel.

  “I am one who looks for challenges and it has certainly been exciting since I’ve started here (Ho Hup)... having a lot of meetings with bankers and the staff, basically getting into the thick of things,” says Lim of the task before him.

“I am ready to take on the challenges and there are a lot of opportunities for Ho Hup. Being an established company that is older than I am, the company has built a strong name in the construction sector with expertise in numerous fields like infrastructure and transport,” Lim tells City & Country.

He says prospective investors have shown interest in the Jalil City project, which the company plans to launch in the next six to nine months.

Ho Hup diversified into property development in 1999 —  through subsidiary Bukit Jalil Development Sdn Bhd — with the 150-acre Bandar Bukit Jalil.

Recent times have been troubling for the company. Besides being slapped with PN17 status in July last year, there had been news reports of an alleged power struggle between former managing director Datuk Low Tuck Choy and Datuk Vincent Lye Ek Seang.

Low, who was appointed Ho Hup executive director in 1984, took over as managing director a decade later upon the demise of his father and Ho Hup founder Low Chee.

Lye, according to reports, emerged as a substantial Ho Hup shareholder in September 2007 with a 5.71% stake. However, a month later, he sold down his stake.

In May last year, it was reported that his wife Datin Viannie Damit @ Undikai has emerged as a substantial shareholder after acquiring 17.54 million shares in the company via Extreme System Sdn Bhd.

As at Aug 5, 2008, Extreme System’s stake had risen to 27.95% or 28.51 million shares. Lye also has interests in quarry operator Minetech Resources Bhd and property developer Magna Prima Bhd.

Ho Hup has been in the red since FY2006, posting a net loss of RM35.1 million. For FY2008, its net loss after tax widened to RM56.2 million from RM46.2 million in FY2007. In a bid to raise working capital, the company disposed of two parcels of land in Bukit Jalil in March — a 5.5-acre site to Santari Sdn Bhd for RM9.83 million and a 10.86-acre tract to Permata Juang Sdn Bhd, a subsidiary of Magna Prima, for RM19.41 million.

The turnaround plan
Apart from property development, the group has a varied spectrum of activities such as civil engineering works, foundation engineering, oil and gas works and quarry operations.

AmMerchant has been appointed to advise on Ho Hup’s corporate restructuring exercise, which will involve a cash call.  Lim says the company is on target to be taken off the PN17 list by year’s end or by February 2010 at the latest. Details on the size of the rights issue and utilisation of the  proceeds are being worked out.

Phase one of the turnaround plan will see a streamlining of the company’s resources into three business divisions — construction; property development; and trading and ready-mix concrete business.

“We will be bringing in a new team to manage each of our core business divisions. Ultimately, to turn around the company is a joint effort of the old and new staff members who must share a common goal. We are also reassembling the old team by identifying their strengths and weaknesses, as well as to instil a quality-driven culture to run it professionally,” Lim says.

He sees the property development division, now in its infancy, eventually becoming the core earner for the group. Lim aims to grow its contribution in the next three years to 60% or 70% (from 25% in FY2008). “Property development will give us the cash flow and we will concentrate on the Jalil City development first. Apart from its freehold tenure, Bukit Jalil has become an established area over the years and is viewed as a gold mine in the southern territory in Kuala Lumpur,” he explains.


Medium-cost apartments with condominium facilities in Bandar Bukit Jalil that were handed over to buyers in 2004.  To date, the developer has sold some RM350 million worth of properties at its Bandar Bukit Jalil development and delivered 2,170 homes. Unbilled sales amount to RM43 million while about 85 homes are currently under construction.

As for its construction unit, Ho Hup has completed projects totalling RM2.85 billion, including the North Expressway Central Link and KLIA Expressway, Petronas Twin Towers and Sabah Gas Pipeline Development Project.

The group’s ongoing job on the Trans Eastern Kedah Interland Highway is worth RM230 million. According to its 2008 annual report, the construction division contributed just under 40% to group revenue.


In future, the construction division will focus more on government contracts, particularly infrastructure and building civil works.
Phase two of the turnaround plan, says Lim, will see a rebranding and repositioning of the group’s corporate image.

The final phase will see Ho Hup moving into the development of premium projects with high GDV in the Klang Valley.

Once the company is on a stronger footing financially and has established its name as a property developer, it will then source for landbank, says Lim.

He likes niche or pocket-sized developments for sustainable growth. “I’m quite resourceful in looking for landbank,” he declares. “Give me a few years to get cash flow and once our financials are right, everything else will fall in place,” he says, adding that the group is not averse to teaming up with third parties for joint-venture developments.

Right timing
Jalil City will debut with a pre-launch of its shopoffices in the next six to nine months. The run-up will see registration of interest from the public in the next two months. It’s akin to a market survey, says Lim. “From this exercise, we can gauge our prospective buyers’ acceptance of the shops’ concept and pricing,” he adds.

The 4 to 8-storey shopoffices, measuring 26ft by 80 ft, will come with lifts and are expected to be tagged from RM2.5 million. Lim is confident there is still strong demand for such commercial-type products, which he says could provide annual yields of 6% to 7%. “In fact, the capital appreciation for shopoffices is more lucrative, depending on their location. To enhance property values, the timing has got to be right and with Bandar Bukit Jalil established over the years with an existing surrounding population, we feel the timing is right,” he adds.

Ho Hup is now in talks with several hypermarket retailers to set up shop on a 9.2-acre site in Jalil City. However, the developer has not decided whether to sell the land or to enter into a build-and-lease arrangement.

The highlight of Jalil City will be the lifestyle central piazza, with food and beverage and entertainment components. As for the office tower, Lim says Ho Hup may sell or keep it for recurring rental income.

Earlier this year, Ho Hup has started a registration exercise for the upcoming launch and final phase of the gated and guarded Jalil Sutera, comprising 20 units of 2½-storey semi-detached houses with a total GDV of RM30 million. Some 200 people have shown their interest in the project located in Bandar Bukit Jalil.

Slated to be launched in September, with construction to begin in October, the units (land area: 4,000 sq ft, built-up: 3,800 sq ft) are priced from RM1.35 million to RM1.55 million, with monthly maintenance fees from RM150.

Ho Hup first went into property development in 1999 with the launch of medium-cost apartments in Bandar Bukit Jalil, with built-ups of 1,080 sq ft. These were sold at an average of RM168,500.

The Bandar Bukit Jalil township also features 2½-storey link homes in six phases, the final phase of which is expected to be handed over this month.

In August, 12 units of 2½-storey semi-detached homes in Bandar Bukit Jalil with a GDV of RM6.98 million would be handed over.




This article appeared in City & Country page, the property pullout of The Edge Malaysia, Issue 759, June 15-21, 2009.

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