KUALA LUMPUR (May 6): Ho Hup Construction Co Bhd’s RM1 billion mixed development project in Bukit Jalil will be suspended as it plans to sell the project's 3.09-acre land for RM110 million cash.

The disposal deal, inked between Ho Hup’s wholly-owned unit Bukit Jalil Development Sdn Bhd (BJD) and Exsim Development Sdn Bhd’s wholly-owned subsidiary Exsim Persiaran Jalil Sdn Bhd, is aimed to improve the group’s financial position, it said in a bourse filing on Monday.

The Bukit Jalil land was approved for the development of the Flex project: two tower blocks (comprising small office-versatile-office units, a hotel, and serviced apartments) to be built on top of an eight-storey podium consisting three retail spaces and 20 retail shops.

“In consideration of the disposal, Exsim Persiaran Jalil intends to suspend the existing Flex project and terminate all contracts with the existing consultants and contractor and the existing end purchasers,” Ho Hup said.

In addition to the RM110 million disposal consideration, Exsim Persiaran Jalil is to also assume RM10.6 million in outstanding development charges BJD owes.  

From the RM110 million consideration, Ho Hup has earmarked RM80 million to repay bank borrowings, RM21 million to refund existing end purchasers of the project's Sovo units, and RM8.5 million to pay consultants and the contractor.

The land's price tag was agreed upon in consideration of the land’s indicative value, with the benefit of the development order and vacant possession, of RM108 million as valued by an independent valuer.

Under the group’s audited financial statements as at end-December 2023, the land carried a net book value of RM119.42 million. Ho Hup is expected to record a one-off net loss on disposal of RM9.92 million.

Ho Hup said that given the Flex project’s “recent commencement” and substantial capital requirements, the disposal offers an opportunity to improve the group’s liquidity and fortify its financial position.

The group noted the disposal is to trim its gearing ratio to 1.31 times (total borrowings of RM429.14 million on net assets of RM328.58 million) from 1.49 times (total borrowings of RM509.14 million on net assets of RM338.48 million).

The land sale, subject to requisite approvals from, among others, shareholders at an extraordinary general meeting to be convened, is expected to be completed in the third quarter of 2024.

Exsim Development is owned by Exsim’s Lim brothers, namely Lim Aik Hoe, Lim Aik Kiat, and Lim Aik Fu, according to Ho Hup.

Shares in Ho Hup ended one sen or 6.67% lower at 14 sen, giving the group a market capitalisation of RM72.56 million.