HCK to rebrand Empire Remix 2 into education city

This article first appeared in The Edge Financial Daily, on February 14, 2019.
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HCK Capital Group Bhd
(Feb 13, RM1.29)
Maintain sell with an unchanged target price (TP) of RM1.06:
HCK Capital Group Bhd has appointed Kerjaya Prospek as the main contractor for the Empire Remix 2 development in USJ1, Subang Jaya.

The RM280 million contract covers the construction of the main building for the proposed project of four towers on a three-storey podium comprising retail units, offices, common area and facilities with a four-level basement car park.

The contract shall commence on April 1, 2019 and is to be completed within 28 months.

To recap, on Jan 15, HCK entered into a joint venture agreement with landowner Projek Muara Sdn Bhd and beneficial owner Dergahayu Sdn Bhd to take over the development of Empire Remix 2 from cash-strapped Mammoth Empire Holding Sdn Bhd (MEH).

Previously in 2012, HCK purchased two properties en bloc in Empire Remix 2 from MEH. However, both properties were not completed due to MEH’s financial troubles.

The properties are The Duo comprising a 28-storey of serviced office suites (studio) with gross development value (GDV) of RM285 million, and The Cubiz comprising a 12-storey block of suites with GDV of RM95 million.

HCK will rebrand the Empire Remix 2 development into an integrated education city. However, we are concerned that the financing for the development would lift its gearing level from 0.8 times currently.

Valuation and recommendation is to maintain forecast earnings and to a “sell” call with an unchanged TP of RM1.06. — JF Apex Research, Feb 13