Vivocom

Vivocom executive director Choo Seng Choon on live radio and taking questions about the company and its bright prospects ahead. You may listen to the podcast here ( http://www.bfm.my/bg-choo-seng-choon-constructing-changes-vivocom )

  • The Group has just secured another two contracts amounting to RM37.8 million, the latest in a number of “Rolling Thunder” project wins!
  • Group’s order book now swells to above RM1.4 billion!

Vivocom Intl Holdings Berhad (“Vivocom”; stock code 0069) has just announced to Bursa Malaysia that the Group has secured another two separate contracts amounting to RM37.8 million which further enhances its already strong earnings and net assets to date.

Vivocom’s construction arm, Vivocom Enterprise Sdn Bhd, today received and accepted a Letter of Award (“LOA”) for a RM25 million construction project from Kiara 5 Development Sdn Bhd to be Turnkey Contractor for the construction of a block of 19 units low density apartment at Kampung Kayu Ara, Mukim Sungai Buloh, Daerah Petaling, Selangor Darul Ehsan.

Meanwhile, its manufacturing division spearheaded by Neata Aluminium (Malaysia) Sdn Bhd had separately received and accepted a LOA amounting to RM12.8 million from Lim Hoo Seng Construction Sdn Bhd for the design, fabrication, supply, delivery and installation of aluminium and glazing works for a 41-storey serviced apartment block located at Lot 256, Seksyen 63, Lorong Stonor, Kuala Lumpur.

These said contracts secured are the latest of its “Rolling Thunder” wins which has resulted in the Vivocom Group’s order book swelling to above RM1.4 billion, and coming on the heels of its sterling Q1 2016 results when it exceeded analysts’ expectations by a whopping 76%!

To recap, for Q1 2016, Vivocom’s quarterly revenue surged to RM141.54 million with profit before taxation soaring to RM33.29 million for the first three months of 2016. After accounting for taxation and minority interests, net profit came in at RM19.87 million, a 2,053 percent giant of a jump from the RM923,000 posted in the previous corresponding period.

This huge jump in revenue and profits was attributed to Vivocom’s construction division which posted PBT of RM30.01 million of the back of RM125.81 million in revenue.

Strong fundamentals yet to be reflected in Vivocom’s share price performance

Vivocom, which has been the “darling of the stock market” (previously) and “talk of the town” within the foreign and local investing communities, have seen its stock price weakening in recent weeks.

From an all high of 37 sen, the stock price slipped to 24 sen at last Tuesday’s close (before yesterday’s public holiday).

The overall sell down could very much be due to the general bearishness in the stock market given the detrimental news such as the MSCI rebalancing on Malaysia, the negativity surrounding the 1MDB saga and more importantly the extremely weak and vulnerable local Malaysian stock market, where both foreign and domestic investors are simply very nervous and will dump share for no apparent sound reasons.

For instance, in a hot market the value of shares transacted in the local KLCI would easily exceed RM2 billion, but the value transacted has been way below that level in recent weeks, sometimes even below RM500 million. The market is literally in hibernation.

The other possible reason could also be due to certain speculative investors who decided to cash out on their investments after the company’s announcement on its smashing 1st quarter results, the “sell on news” phenomena. To compound matters, anxiety amongst the investing community concerning “Brexit” or the possibility of the United Kingdom leaving the European Union could result in currency and economic uncertainties.  Just a few days ago, legendary investor George Soros warned that a “Brexit” aftermath would be worse than the time he broke Bank of England”. (Interesting read here on Soros’ view on why “the Brexit crash will make all of you poorer – be warned”.)

All these negative developments had a bearing on Vivocom’s share price – just as they had on other stocks listed on Bursa Malaysia. However, what remains intact are Vivocom’s strong fundamentals.

Vivocom’s executive director Choo Seng Choon stated: “With the latest contract wins just announced, Vivocom has proven yet again its ability to secure projects, both large and small”.

“We shall continue to work very hard on securing more projects to deliver on our fundamentals performance, and we are very confident the investment community will give the Company due recognition in due course,” Choo added.

“As a matter of fact, we are now in the last stage of finalising another Head of Agreement for another project worth over RM600 million in Ipoh. The HOA will be announced in due course when completed and signed. The Company’s second quarterly results to be reported and announced in the coming weeks also look very promising and would be at least as strong as the first quarter just announced,” he further said.

Based on its annualised 1st quarter results, it’s worthwhile noting that Vivocom is currently only trading at less than 10 times price-earnings multiple whilst its peers with similar market capitalization are currently trading at price-earnings multiples ranging from 14 times to 17 times.

Meanwhile, it’s noteworthy that Vivocom shareholders base has jumped from 12,255 (on 19 February) to almost 15,000 today, a confirmation that interest in the company is still strong and growing. Obviously there are many investors out there who see tremendous value in Vivocom, indicating a high level of natural support for the share. Hence this explains the consistently high volume and liquidity on the counter of at least 1 billion shares turnover on average monthly for the past 8 months, a feat rarely seen in Malaysian stocks.

What is more, all 5 research houses covering Vivocom namely CIMB, MIDF, Mercury Securities, TE Research and SJ Securities continue to emphasis a “BUY ON VIVOCOM” – with target prices ranging from 59 sen to RM75 sen per share, signaling strong upside potential and capital appreciation of some 145% from the most conservative estimate for Vivocom’s fair value (which is MIDF’s at 59 sen).

That said, the recent price correction is a healthy phenomenon and represents an excellent opportunity for investors to buy as its price weakness has made the share relatively cheap compared to its peers and ride on its upward potential for the next 12 months – meaning, Vivocom could yet shine again!

In summary, based on its impressive 1st quarter results, its strong order book and the “buy calls” accorded to the company by the various research houses, the future of Vivocom remains bright.


Business Today

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