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Vivocom (MYR0.315): Securing ~MYR600m new jobs YTD
Vivocom’s 78.6%-owned indirect subsidiary, Vivocom Enterprise S/B (VESB), entered into a heads of agreement (HoA) with Green Ventures Development S/B to be the main contractor for a mixed development project on a piece of 3.11 ha land in Hulu Kinta, Perak. The estimated contract value is approximately MYR90m.
Green Ventures was appointed as the developer for this project which has a GDV of MYR112m. Under the HoA, VESB will need to complete the construction of the whole development within 24 months after the launch.
Assuming a construction GP margin of 14% (FY15: 14.3%), this project could contribute MYR9.9m to its gross profit into FY18 (for its 78.6% stake).
Vivocom has secured about MYR598m new jobs YTD, forming 20% of the street’s MYR3b new job win assumption. It is widely believed that Vivocom will benefit from China Railway Construction Corp (CRCC)’s exposure in the domestic construction space. The street expects Vivocom to benefit from CRCC’s participation in the Gemas-Johor Baru double-track rail project and the Mentakab-Kuantan rail project.
Against the backdrop of strong jobs pipeline, the street is forecasting a 3-year 153% EPS CAGR for FY15-18. Brokers are bullish on the stock. There are two Buys with a mean target price of MYR0.68.
At current price, the stock is trading at 14.3x consensus FY16 EPS of 2.2sen but a more compelling FY17 PER of 5.3x. Key parameter to monitor is the value of new job win which is crucial to confirm the bullish expectations on the stock.
Fr Maybank IB |
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