KUALA LUMPUR (June 26): Property developer cum builder Ho Hup Construction Company Bhd has proposed to acquire a 70% stake in a private company, which is planning to develop a 4.99-acre commercial leasehold land in Kota Kinabalu, Sabah, into a mixed development with a gross development value (GDV) of RM774 million.

In a filing with Bursa Malaysia today, Ho Hup (fundamental: 1.9; valuation: 1.2) said its 75%-owned subsidiary Ho Hup Ventures (KK) Sdn Bhd has entered into a share sale agreement with Agro Padi Sdn Bhd to acquire the said stake in Golden Wave Sdn Bhd (GWSB) for RM30 million.

Ho Hup said GWSB had in 2010 entered into a joint venture agreement (JVA) with DBKK Holdings Sdn Bhd to develop a bus terminal and car park on a land owned by the latter at Jalan Wawasan, at a cost not exceeding RM46.92 million, in exchange for an adjacent piece of commercial leasehold land.

Pursuant to the JVA, the title of the adjacent land shall be delivered to GWSB, upon completion and delivery of the bus terminal or a bank guarantee to be issued in favour of DBKK in exchange for the immediate transfer of the title of the land, prior to the completion of the bus terminal.

The construction of the bus terminal is approximately 19% complete as at April 30 and is scheduled to be completed in June 2016, and will be financed via bank borrowings.

“The indicative market value of the land is RM185 million, as appraised by Knight Frank Malaysia Sdn Bhd, an independent firm registered with the Board of Valuers, Appraisers & Estate Agents Malaysia,” the filing read.

The proposed use of the land is for a mixed development comprising service apartments, hotels, and commercial shoplots.

Ho Hup said the development is expected to span five years from 2015 to 2020. The land, it added, is a prime commercial land with a 99-year lease, which will expire on Dec 31, 2011.

Ho Hup reasoned the proposed acquisition will add 4.99 acres of prime commercial land bank in Kota Kinabalu, Sabah, to Ho Hup’s existing land bank of 2.8 acres, as well as its 50 acres of joint venture development land in Bukit Jalil City, with Pioneer Haven Sdn Bhd.

“The proposed acquisition is in line with the group’s strategy to carry out development projects in strategic locations with high development value,” said Ho Hup.

“The board is confident that the proposed development of the land would enhance the future revenue and earnings of the group,” it added.

It will fund the purchase of the equity stake, with internally-generated funds.

The group’s share price increased two sen or 1.65% to close at RM1.23 apiece today, for a market capitalisation of RM417.5 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)