Foreign shareholder may enter Vivocom to leverage strategic China partnerships

Vivocom is the in-house contractor and Project Delivery Partner of China Railway Construction Corporation Ltd (CRCC), one of the largest construction enterprises in China and the world, and ranked 80th within Fortune Global 500 companies.

Focus Malaysia, one of Malaysia’s leading business media, had an interesting scoop for the investing community this week.

In a report published today, Focus indicated that, according to its source, Vivocom Intl Holdings Berhad (stock code: 0069) may see the emergence of another foreign shareholder following the entry of Australia-based Macquarie Ltd which had bought into the company.


Its source says a Hong Kong Exchange-listed company has expressed interest in buying a majority stake in Vivocom: “The potential new shareholder is understood to be a construction group as well, and is seeking to expand its footprint in the region by participating in Malaysia infrastructure projects.”

The report added that the Hong Kong construction outfit became interested in Vivocom due to its working relationship with China Railway Construction Corporation Ltd (CRCC). Vivocom is the in-house contractor and Project Delivery Partner in Malaysia of CRCC Malaysia. CRCC in turn is known globally as one of the largest construction enterprises in China and the world, and ranked 80th within Fortune Global 500 companies.

Vivocom executive director Choo Seng Choon (left) sealing the partnership with Zhonghe Huaxing Development executive director Datuk Lee Hwa Cheng (right) last year. Witnessing the signing ceremony was (in centre) China Nuclear Industry Huaxing Construction Company Ltd general manager (international projects division) Zhou Bo.

Vivocom also enjoys a strategic partnership with the China Nuclear Engineering Group Corporation Group, a conglomerate with expertise in the construction of military and civil infrastructures as well as commercial development, both in China and abroad. China Nuclear Engineering Group Corporation is a state owned enterprise held by the central government of China.

Vivocom had announced that Macquarie had subscribed for a private placement exercise. Macquarie Bank is a subsidiary of Macquarie Group Ltd.

A fortnight ago, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) emerged from a meeting with Vivocom executive director Choo Seng Choon feeling reassured with its estimates.

It said that Vivocom presents a very attractive yield of 10.5 per cent on the back of 6.75 per cent spread against the five-year Malaysian Government Securities (MGS) yield of 3.76 per cent.

The research arm was confident that earnings will grow stronger in FYE18 backed by Vivocom’s strong revenue growth and profit margin as compared to the group’s peers. MIDF Research noted that for affordable housing, the management has indicated that Perak and Terengganu present stable opportunities as the demand is continuous.

Vivocom closed yesterday (Thursday, 27 July) 7.41 percent higher at 14.5 sen from the previous day’s close of 13.5 sen.

MIDF Research’s recommendation: “We reaffirm our BUY recommendation with a TP of RM0.40 per share based on discounted cash flow (DCF) with WACC of 7.4%.Our target price implies an enticing +347% upside backed by an undemanding current PER of 9.5X.”