HoHup - Gems of the Gems?

The overall market had turn into slight correction after a seemingly tired and wear off bull had been charging from the lows of 1660 during the end of August 2013. As of today, KLCI had been sitting at 1806 points with 10 points being shred off today as correction take place.

While the market had been shredding points, the stories and happening behind HoHup could be rather an interesting one as the recent price movement activities between HoHup, FRB and Insas had in turn become more and more active being traded in the market for the past 3 months as the same boss behind this 3 company, Datuk Thong Kok Khee, had been trying to unlock the golds and diamond out before the financial cycle is turning towards a more bearish moment.




A very clear and straight forward look on both Insas and FRB will mark out that October 2013 had saw volume of both the 2 counters rising with the Datuk Thong direct purchases and company buy back occurred in Insas while Datuk Thong had also buy back through open market on FRB shares.

HoHup had been encountering the same buy back by Datuk Thong through open market which had spiral the stock way upwards to RM 1.80 in no time.

While there are news that HoHup flight is because of it's uplifting on their current PN17 status, I believe HoHup spikes had not been just so easy and will possibly be a take over and privatization target by FRB which had been holding more than 20% of stakes in HoHup. Many would be wondering why HoHup had suddenly turn from a charcoal to be a diamond.

Probably some of the facts will see why HoHup came from charcoal to diamond.
- HoHup owned 60 acre of land in Bukit Jalil. 50 acre developed by Malton which will possibly feature Pavillion 2, and might be bringing a GDV of RM 2b in estimation.
- HoHup entitlement for 18% of the GDV or a minimum or RM 220m, of which RM80m being cash advance for HoHup to restructure on their debts.
- HoHup 10 acre which is divided into Parcel A with GDV close to RM400m and near to 90% sold off, Parcel B is estimated with GDV more than RM500m with high ends condominium in their line. A combined total of RM900m in GDV.

A simple calculation will be looking at HoHup pocketing RM220m (confirmed amount) + 30% from estimation of RM900m GDV which is RM270m will resort to a total of RM490m in profits.
Standing at 102m shares, we are looking at an EPS of RM4.8 for the whole project period when earnings start to kick in.

With this being laid out, sources that are reliant had also informed that HoHup will be a privatized target by FRB which could take place in the 1st or 2nd quarter of 2014 as Datuk Thong will be looking to unlock HoHup value under his own umbrella using FRB and Insas.

On a quick outlook, HoHup is definitely a gem which should not be overlooked because of the PN17 status. A longer term outlook will suggest that HoHup might be trading at RM 2.40 (RM140m after less RM80m for debt repayment and 30% of RM400m from parcel A = RM260m. EPS = RM 2.55 per share) as time get closer and closer.


Bone's short term TP: RM 2.10 (upgrade)

Cheers and happy trading

Regards,
Bone