5169 HOHUP >>> New jobs to help bring back profits

PROPERTY and construction firm Ho Hup Construction Co Bhd (5169) is betting on its RM2 billion Jalil City development and new jobs to return to profitability next year. Group managing director Lim Ching Choy said at a media briefing yesterday that it had bid for five road projects worth RM500 million and hoped to get one or two jobs this year.

He said that Ho Hup's ready-mix business was set to improve as it reactivated its eight plants in Terengganu, Klang, Bukit Jalil and Jinjang to increase volume and generate RM6 million in revenue this year. The group's property, construction and ready-mix divisions are expected to contribute 30 per cent, 8 per cent and 5 per cent profit margins respectively.

Lim, who joined Ho Hup on June 1, is spearheading its corporate restructuring to reduce debt, inject new capital, sell non-core assets and generate revenue to become profitable. The financially troubled firm has been in the red since 2006. In the fiscal year ended December 31 2008, its net loss was RM56.2 million.Ho Hup is gearing to launch Jalil City in Bukit Jalil in the fourth quarter, which will help in its turnaround. Lim said his immediate plan was to reduce the company's debt to RM60 million, from RM113 million, by the first quarter of next year. This will be done through a capital injection and sale of non-core assets, saving it RM4 million.

Ho Hup is banking on Jalil City to pay off the rest of its borrowings in five years. The 24ha Jalil City is poised to contribute 60 per cent to 70 per cent of revenue a year, Lim added.

"Ho Hup is facing cash flow problem. When you have cash flow, the margins are different. We have a diamond which needs to be polished. I will monitor the cash flow on a weekly basis. Since I came in, I have generated RM3 million in cash," he said.Jalil City, to be developed over six years, will feature 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.

According to Lim, Ho Hup will launch the shop-offices, worth RM600 million, by December, concurrently with the 400,000 sq ft hypermarket and condominiums. It hopes to lease the hypermarket to Carrefour, Tesco or Giant before the launch. Lim also told Business Times that Ho Hup will retain the office building, piazza, hypermarket and several of the shop-offices as investments, giving it a new income stream. He said Ho Hup stood to close three en bloc deals by December for some of the shop-offices.