It’s not over for Ho Hup

(Published in the StarBiz 2nd April 2012, page 1)

By JAGDEV SINGH SIDHU 

It still faces obstacles in its Bukit Jalil project despite High Court ruling

KUALA LUMPUR: Ho Hup Construction Company Bhd still faces a number of hurdles to get its Bukit Jalil project off the ground even though a ruling by the High Court has ordered the company to buy out the other shareholder that owns the rights to the land.

Among the concerns raised was the ability to raise financing to buyoutZen Courts Sdn Bhd, which appears in a favourable position post the judgement, off its 30% share of Bukit Jalil Development Sdn Bhd (BJD), which owns the right to develop 60-arces of prime land in Bukit Jalil.

It is still unclear as to who would get the right to develop the land.

Ho Hup has appealed to the Federal Court to hear its case of having the development rights to the project after the Court of Appeal upheldMalton Bhd's case of being a joint developer to the land.

In dispute is the joint development agreement where Pioneer Haven, a subsidiary of Malton, would fund and develop the land and BJD would be entitled to 17% of the gross development value of the project with a minimum payment of RM265mil to be paid throughout the development of the land.

Ho Hup's executive director Derek Wong said it was premature to speak about financing the buy out of Zen Courts.

“At the appropriate time, the necessary announcements will be made,” he told StarBiz in an email response. “The Court's order to Ho Hup to acquire the 30% equity held by Zen Courts would give Ho Hup 100% of BJD and thus bring the shareholder dispute at the Bukit Jalil Development Sdn Bhd subsidiary to a conclusion.”

The High Court on March 27 ordered that Ho Hup bought Zen Courts' shares in BJD on a price to be determined by the net tangible asset of the BJD as at March 27 which needs to be valued by a mutually agreed independent valuer between Ho Hup and Zen Courts.

BJD was last reported to have a net book value of RM122.46mil as at Dec 31, 2010, including development costs.

While it may appear to be headed to a conclusion, one concern is that valuation of the land would have since soared and a revaluation of the 60-arces would see the value of BJD rise beyond its previously reported number. One suggestion is that the land at Bukit Jalil could be value at RM130 to RM150 per sq ft.

At the top end of that valuation, that land could be worth as much as RM392mil. Reports have indicated that the potential development of the land could produce a gross development value of RM4bil to RM4.5bil.

The other issue is that should Ho Hup, which is classified as a PN17 company, find it difficult to raise the funds to buyout Zen Courts after an independent valuation is done, Zen Courts retains the right to wind up BJD.