Shares of financially distressed Ho Hup Construction Company Bhd surged 37.14% or 19.5 sen to 72 sen yesterday following an announcement that it planned to acquire two companies to help regularise its financial position.
The stock had traded to an intra-day high of 78 sen and a low of 54 sen before closing at 72 sen, with 654,200 shares traded.
Ho Hup which has been classified as a PN17 affected issuer due to its deficit in shareholders’ funds, announced last week that it had entered into a memorandum of understanding (MoU) to acquire 100% equity in two companies — Fivestar Development (Puchong) Sdn Bhd and Kolektra Recreation Sdn Bhd.
The MoU is to facilitate Ho Hup to undertake a regularisation plan so that it could exit its PN17 status.
It is not known why Ho Hup’s share price has been rising lately but market observers do not discount the possibility that the excitement could have stemmed from the idea of the company issuing new shares at RM1 apiece to fund its proposed acquisition of the two companies.
“As Ho Hup is likely to finance the purchase with new shares that can be issued at RM1 each, this may have caused some excitement. But since it is only an MoU and there are no details on the strength of the two companies, it’s still premature,” said a dealer.
The stock had traded to a 52-week high of RM2.08 on Jan 6, 2010 and a low of 29 sen on Nov 2, 2009. It has fallen by 18.64% year to date.
Currently, Extreme System Sdn Bhd, the vehicle of Datuk Vincent Lye is the single largest shareholder of Ho Hup with close to a 28% stake followed by Low Chee & Sons Sdn Bhd with 22.66%. The third largest shareholder is Tan Sri Tong Yoke Kim with 7.28%.
In tandem with the MoU, Ho Hup is seeking a further extension of six months until Feb 4, 2011 to submit its regularisation plan to the relevant authorities.
Over the past one year, the company had seen a long-drawn boardroom battle between Datuk Low Tuck Choy, son of Ho Hup’s founder, and Lye. In the midst of disputes over land deals and restructuring plans presented by both Low and Lye to help the construction firmget back on its feet, an EGM held in mid-March saw the removal of directors linked to Lye and being replaced with those friendly to Low. Low is also one of three owners of Low Chee & Sons.
But Lye’s exit was not without drama. Hours before the EGM, the board which he headed made an announcement to Bursa Malaysia that Ho Hup’s unit Bukit Jalil Development Sdn Bhd (BJD) had formed a joint venture (JV) development agreement with Malton Bhd’s subsidiary Pioneer Haven Sdn Bhd to develop a parcel of land owned by BJD.
The JV would entitle BJD to at least RM265 million while Pioneer Haven would be solely responsible for meeting and defraying the development costs.
The agreement, entered into in the final hours before the EGM that saw the ouster of Lye, is being contested by the current board headed by allies of Low. There is a suit in relation to the matter.
The 60-acre land that is the subject matter of the JV with Malton is Ho Hup’s most valuable asset and the key to its revival.
Ho Hup posted a net loss RM3.92 million for the first quarter ended March 31, 2010 (1QFY10) against a net loss RM5.55 million a year ago while revenue fell 55% to RM5.67 million. It posted a loss per share of 3.87 sen in 1QFY10 while net asset per share stood at -19 sen as at March 31.
This article appeared in The Edge Financial Daily, July 20, 2010.
No comments:
Post a Comment