Ho Hup Construction Company (Hohup - 5169) could be able to see value emerging at the current state of price. Hohup had went through a strings of corporate exercise that had saw the group coming out from it's PN17 status. Currently, the group is actively involved in construction project in Johor, Sabah and it's maiden property development and construction project in Bukit Jalil.
What could be so interesting in Hohup at the current juncture ?
The last incident on Hohup dropping to RM 0.80 is associated with the spillover effect from market shake up from China and the US market. However, stock rebounded swiftly with renew buying from major shareholder Datuk Thong Kok Khee as well as employee exercising ESOS.
The current technical reading could signal Hohup being well supported at RM 0.80. Interestingly, Hohup downtrend line had saw good intersection with the support line, suggesting a potential technical rebound on the current level. Primary resistant level will be set at RM 0.90, and breaking above RM 0.90 will suggest RM 1.00 as the stronger resistant level.
Hohup, a bargaining value buy
Valuation of a company is very subjective. Adding up to the current market sentiment, investor are becoming stricter in defining a true value buy in a company. What would be the case for Hohup ?
Based on the performance for the past 3 quarters, the total EPS for Hohup is actually 16.14 cents. The earning are derived from progress billing from ongoing construction in Aurora Place in Bukit Jalil City, Polytechnic Kuala Terengganu and RAPID in Johor.
For the coming 2nd quarter result that will be released in August, Hohup will be seeing stronger revenue and earning per share from
- Progressive billing on Aurora Place, Bukit Jalil City which is at approx 50% completion
- Polytechnic Kuala Terengganu
- Rapid Pengerang
- JDA with Pioneer Haven Sdn Bhd for foundation work
- West Coast Expressway sub-contract work from Teluk Intan to Kampung Lekir, Perak
- 2 new construction project in Johor and Perak worth RM 384 million
Despite the current market condition, Hohup earning had been resilient. Season analyst would see this as "value lock out". Hohup is possibly not under analyst coverage due and also due to sector wide downgrade in the properties industry.
With more new project secured, Hohup will also be doing a second corporate exercise in order to raise minimum RM 111 million from rights issue with free warrants.
The current market capitalization on Hohup only RM 280 million based on 350 million shares issue. While investor might be aware of the maturity of preference shares (Hohup-PA and Hohup-PB) in the end of December 2016, the additional conversion of 24.95 million shares is not a huge dilution to the earnings of the company, considering ongoing projects and upcoming projects in the pipeline.
For the FYE 2016, Hohup will be able to deliver decent earning, with decent estimation of 20 cents. Trading at PER x 7, Hohup should be trading at RM 1.40.
Short term target : RM 1.00
HOHUP (5169) - Ho Hup Construction Company - Value Bargain
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