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Monday, June 29, 2009

Ho Hup drafting turnaround strategy

The three-year business plan will see the company operating under three business entities - construction, property development and trading of ready-mix

Property and construction company Ho Hup Construction Co Bhd said it is drafting a three-year business plan that will see it return to profitability next year and ensure that its profitability will continue into the future.

The plan will see the company operating under three business entities - construction, property development and trading of ready-mix - to be headed by three individuals who will lead a team of staff to drive up sales.

"Each head of division will have to come up with their own business plan, which I will enhance to ensure that they are profitable from day one. I will monitor their progress every two weeks," Ho Hup group managing director Lim Ching Choy told Business Times.

"At the end of the day, I am here to make profits for the company and enhance shareholders value. Two years from now, we may have a dividend policy," he said.
Lim, formerly the chief executive officer (CEO) of property developer Magna Prima Bhd, took helm at Ho Hup on June 1 2009.

Dubbed "the turnaround man", he was asked to helm Ho Hup by its major shareholders to return it to profitability.

The company has been in the red since 2006. In the fiscal year ended December 31 2008, its net loss was RM56.2 million.

Lim said he has been spearheading Ho Hup's corporate restructuring to reduce debt, inject new capital and generate revenue since he took office.

"You need six months to reposition, turn around and overhaul the business of an ailing company. I will be doing a lot of things in the next six months what other people have not done in the last five years. I believe a good working philosophy and commitment from myself is important to make things work in a short span of time," Lim said.

Lim, who was in banking for 22 years, had turned around loss-making Magna Prima in 12 months. Prior to that, he had rebranded and repositioned Mah Sing Group Bhd in 18 months.

He was involved in both companies for 30 months and four-and-a-half years, respectively.

"I may stay longer in Ho Hup. It has all the licences for any kind of construction jobs. That alone is encouraging and rewarding," Lim said.

Ho Hup is betting on its RM2 billion Jalil City development in Bandar Bukit Jalil, Kuala Lumpur, and new jobs to return to the black next year.

The 24ha project, which will be launched in the fourth quarter, is poised to contribute 60-70 per cent of the company's revenue per year, starting from 2010.

It features 176 shop-offices housed in four- to eight-storey buildings, a hypermarket, a piazza, 2,000 serviced condominium units, and a Grade A office building.

"We will launch the offices worth RM600 million in two phases. We hope to complete sales in a year. We have more than 100 registrations," Lim said.

Ho Hup will also launch 20 semi-detached houses in Bandar Bukit Jalil, worth RM1.5 million each or RM30 million in total, in September.

Apart from residential projects, it will look to clinch government contracts involving infrastructure and high value construction works, and develop mega projects as it had previously.

Ho Hup has bid for government and private sector road and related infrastructure jobs worth RM500 million and hopes to get one or two this year.

Its ready-mix business is also set to improve as it is reactivating its eight plants in Terengganu, Klang, Bukit Jalil and Jinjang to increase volume. The unit is expected to generate RM6 million in revenue this year.

By Business Times (by Sharen Kaur)

Investments in Malaysian hotels plunge

However, there are signs of foreign investors returning to the Malaysian hotel market, says a real estate agent

Transactions involving the buying and selling of Malaysian hotels have plunged fivefold, from RM1.2 billion worth of transactions in 2005 to RM205 million last year, as owners preferred to hold on to their assets as property prices appreciated.

Last year also saw no foreign interests unlike in 2006 and 2007 where more than 60 per cent of the hotel investment volumes were by foreigners.

However, the momentum is expected to pick up this year, said real estate agent Previndran Singhe.

"Prices have now stabilised and so owners are willing to sell," Previndran told Business Times yesterday.

At the same time, there are signs of foreign investors returning to the Malaysian hotel market as real estate agencies including Previndran's company Zerin Properties Sdn Bhd, have been approached by them looking for deals.

Zerin Properties has closed over RM1 billion worth of hotel deals in the past five years.

"The foreigners are returning and they are willing to pay the market price, as they realised that they are unable to bargain since there is no property crisis here," Previndran said.

He added that their interest in Malaysian hospitality is spurred by the country's strong tourism market.

"We welcome more tourists here than in Singapore or even Thailand," he said.

He added that this was despite the fact Malaysia is known to have one of the lowest, if not the lowest, average room rates in the world, which could take an investor a decade to see return on investment.

"They see a potential for an upside in terms of rates," Previndran said.

This year has already seen the sale of the Novotel Hydro Majestic in Kuala Lumpur to The Nomad Residences Sdn Bhd.

Other hotels up for sale and may see deals closed include Sime Darby Bhd's sale of Hotel Equatorial Malacca and Hydro Hotel Penang in Batu Ferringhi.

IGB Corp Bhd has also voiced its intention to dispose of its Renaissance Kuala Lumpur Hotel.

By Business Times (by Vasantha Ganesan)

Malaysia real estate stocks upgraded

MALAYSIAN property developers, set to be the best performers on the Kuala Lumpur stock exchange this quarter, had their stock ratings raised by HwangDBS Vickers Research Sdn Bhd, which said sales are rebounding and potential “positive” policy announcements may bolster demand.

SP Setia Bhd, Malaysia’s biggest property developer, was upgraded to “buy” from “fully valued,” and the target price increased to RM4.50 from RM3.90, HwangDBS said in a report today. Eastern & Oriental Bhd, Sunrise Bhd and Sunway City Bhd were raised to “buy” from “hold,” it said.

“Sales are bottoming out” and “developers are more confident now to resume launches, including high-end” properties, HwangDBS said. Property stocks are now “stepping into the limelight.”

The Kuala Lumpur Property Index of 87 stocks jumped 43 per cent this quarter, outpacing the benchmark Kuala Lumpur Composite Index’s 23 per cent gain, and making it the best performing industry group on the stock exchange.

The plan by Prime Minister Datuk Seri Najib Tun Razak to announce an easing of investment restrictions tomorrow “could further re-rate the sector,” HwangDBS said.

Loan Approvals Rise

Najib, who took office in April, has raised foreign ownership limits in banks and announced a RM67 billion (US$19 billion) spending plan in an effort to boost the economy that he predicts will shrink as much as 5 per cent this year, the first contraction in a decade.

Central bank data showed loans approved for home purchases in April climbed to the highest level in at least a year. Loans approved for home purchases in April rose to RM6.3 billion from a month earlier, the third monthly gain, adding to signs the industry is rebounding.

SP Setia has jumped 47 per cent this quarter, Sunway City climbed 82 per cent, while Eastern & Oriental more than doubled.

By Bloomberg

MPHB’s property ambition faces delay

KUALA LUMPUR: Multi-Purpose Holdings Bhd’s (MPHB) hopes of diversifying its property development portfolio have been delayed by the economic slowdown, which has affected some of its commercial property plans.

“There will be some delays in the property developments that we have planned, as the current market condition is not conducive for new launches,” MPHB chief operating officer (COO) Kheoh And Yeng said after the company’s AGM last week.

At the same time, MPHB is also not ready to relook at the long-delayed Mimaland resort project in Gombak, Selangor. The land belongs to MPHB subsidiary Magnum Corp Bhd.

Kheoh said the company was still monitoring market sentiment but had no plan to start work any time soon. “It is a complex and difficult project, and the situation now is not suitable to start anything,” she said.

Magnum has 2,266ha of land, including some in prized locations such as Gombak, Rawang and Sepang, as well as a parcel near Universiti Sains Malaysia in Penang.

These plots of land hold good potential for future property development.

Asked if MPHB was looking at revaluing some of its land and properties, Kheoh said the company was comfortable with having its assets on book value.

MPHB recently acquired a 9.45% stake in Farlim Bhd for RM3.2 million, raising its shareholding in the property developer to 10.9%. Analysts described the move as an attempt to venture deeper into the property sector.

Meanwhile, MPHB’s gaming business is holding steady. Although the numbers forecast ticket sales dipped to RM2.87 billion in the financial year ended Dec 31, 2008, it was still the group’s biggest income-generating division.

As of the end of the first quarter ended March 31, MPHB had RM585 million in cash and cash equivalents, up 24.75% from RM468.94 million at end-2008.

Total dividends paid amounted to RM80.46 million in fiscal year 2008, representing a 62% payout ratio.

During the first three months of the year, its brokerage and financial services divisions also showed signs of recovery.

The stockbroking arm, represented by Dynamic Pearl Sdn Bhd and its subsidiary A A Anthony Securities Sdn Bhd, recorded a pre-tax profit of RM2.62 million. It made a pre-tax loss of RM3.6 million a year earlier.

The insurance business, meanwhile, managed to narrow its pre-tax loss to RM793,000 from RM9.8 million previously.

Going forward, analysts said the number forecast operations would remain MPHB’s main income contributor, given the lack of other major earnings drivers.

By The EDGE Malaysia (by Tony Goh)