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Friday, June 20, 2014

Ho Hup (Undervalued)

*Updated chart



Ho Hup is currently (19 June 2014) trading at only 4.2 times implied forward PER, cheaper than that of its peers’ average PER of 7.1 times.


Its stock price is undervalued judging from its bright prospects driven by its property division’s crown jewel project in Bukit Jalil.

Its property division will recognize a portion of its JV project on a 50 acre tract in 1QFY2014. Nonetheless, due to the timing of approvals for the project’s new plan and design, ti will only start to contribute from 2QFY2014 onwards.

However a shortfall will definitely be made up in 2015.

Ho Hup’s Bukit Jalil City project with Malton Bhd comprises shop offices, serviced apartments, and shopping mall. It will be officially launched by end of 2014. The group is currently (June 2014) revising the design and plan of the project which will result in a higher GDV to rm4.5 billion.

Assuming the project’s GDV is rm4 billion and based on agreement that Ho Hup is entitled to 18% of the GDV, on average estimate that the project will contribute about rm45 million per annum in net profit throughout the 10 years period of development.

Details of the 50 acres development in Bukit Jalil dubbed Pavilion 2 to be co developed by Ho Hup and Malton will be out by third quarter of 2014.

The project will be the growth driver for Ho Hup.

While the 50 acre piece is for the JV with Malton, Ho Hup has actually started development an adjacent 10 acre on its own, with a GDV of rm10 billion.

On its construction arm, the gorup’s order book stood at rm400 million.

The group is looking to replenish its land bank.

It had ventured into property and construction projects in Myanmar.

After rejuvenated, the company is back in business.

Going forward, observers see clarity in Ho Hup’s earnings visibility as the group is on a clean state to expand and focus on its property development business. A healthy balance sheet following its restructuring exercise puts Ho Hup in a favourable position to build a portfolio of development projects for future growth.

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