Ho Hup expects a ‘fantastic’ FY18

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KUALA LUMPUR (May 19): Ho Hup Construction Co Bhd is expecting to post a set of ‘fantastic’ results for its financial year ending Dec 31, 2018 (FY18), driven by sales from projects it will be launching at the end of this year, and receivables anticipated from its joint development with Malton Bhd.

“We are starting to get a bit more bullish on our property side; next year will be a fantastic year for us. This year, we are launching three projects, [totaling] about RM1.6 billion gross development value (GDV),” Ho Hup chief executive Datuk Derek Wong Kit Leong told reporters, after the group's annual general meeting today.

“We expect the first two quarters to be a bit quiet, [but from] the third quarter [onwards], we will be launching our final phase in Bukit Jalil, [which will have a] GDV of about RM500 million. We are also launching our Kota Kinabalu, Sabah project, [which carries a] GDV of about RM800 million, and our Kulai project (around RM300 million GDV). [That's] all happening in the third and fourth quarter this year,” he said.

At present, Ho Hup’s property development business has unbilled sales of about RM142 million, and management is targeting to achieve sales of around RM100 million for FY17, which is similar to what it achieved in FY16, said Wong.

“It [the flat sales growth forecast for FY17] is also because of timing. Our Bukit Jalil project is coming to its tail end, and we are only launching new projects in the second half of the year. Our joint development with Malton is still on-going, and next year, we will recognise more sales from there,” he said.

Last year, Wong was quoted by The Edge Malaysia Weekly in its Dec 12-18 issue as saying the integrated development it is undertaking with Malton in Bukit Jalil will be able to generate RM372 million in the next four to five years, which averages about RM75 million a year.

Under the joint-development deal, Malton will bear the entire development cost, while Ho Hup provides the land and is entitled to 18% of the estimated GDV of RM3.4 billion. The project comprises a shopping complex, shop offices, office tower, service apartments and a hotel.

Today, Wong said the parking lots for these buildings have been completed and that Malton is progressing towards building the structure. “The parking lot is completed, now they are building the structure, that is where all the billings will be recognised,” he said.

Ho Hup’s property development business contributed over 50% of its total revenue, while the remaining were derived from the construction (25%) and building materials (25%) divisions.

Wong said Ho Hup’s construction order book now amounted to RM454 million, which will keep it busy for the next three years.

“We think we can get another RM300 million to RM400 million worth of jobs this year. Our tender book is about RM4 billion right now, so 10% is no issue, they are mainly government-related projects,” he said.

“Our building materials business, ready-mixed segment, is down about 20% to 30% last year, but still profitable. Our quarry segment is looking very interesting now, because we are close to Melaka Gateway and the Southern portion of the double tracking rail electrification project as well,” he added.

Therefore, Wong expect the quarry division to perform "very well" going forward, driven by these government-initiated infrastructure projects.

Asked about possibility of paying dividends soon, Wong said nothing has been finalised so far, but it is the board’s intention to make distribution, once the group’s cash flow turns stronger.

“We are trying our best, we need to address it very soon. If the cash flow is strong, it is our intention to return and reward the shareholders. It is definitely on our mind and we want to start around two to three sen, but again, nothing is carved in stone yet,” he said.

For FY16, Ho Hup’s cash coffer (including fixed deposits) slid 0.87% to RM27.27 million, from RM27.51 million in FY15.

As at 3:01pm, Ho Hup’s share price gained six sen or 7.06% to 91 sen, giving it a market capitalisation of RM335.51 million.