KUALA LUMPUR: MIDF Research is upbeat that Vivocom International Holdings Bhd will be able to clinch projects related to railway construction and engineering, as well as the Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang, Johor, to add to its order book of RM2.4 billion.
“Our assessment derives from its working arrangements with China Railways Construction Corp Ltd
(CRCC) and Rapid projects under Technicas Reunidas SA,” it said.
“Additionally, Vivocom has attracted institutional foreign shareholding of 5.4 per cent. The Beijing Construction Engineering Group has also expressed interest to participate in Vivocom’s equity capital structure as well as appoint the firm as its local project delivery partner (PDP).”
MIDF Research said Vivocom, a construction player with high growth potential, was transforming into a serious player within the various segments of the construction value chain as it assumed the roles of project manager as well as that of main and sub-contractor.
“The company is seen as a beneficiary of China’s massive foreign direct investment into emerging economies under their ‘New Silk Road’ development policy,” it said.
“What is more surprising is the rate of its order book replenishment. It has grown by 33 per cent from RM1.8 billion in the third quarter of last year to RM2.4 billion to date, especially in the mixed development construction segment.
“The total construction backlog is indicative of the success of its joint venture strategy with CRCC by acting as the project manager, sub-contractor or a combination of both.
“Vivacom stands as a frontrunner for sub and main contracting jobs or as PDP in most of the projects financed by CRCC as it functions as the local construction partner,” said MIDF Research.
The analyst said Vivocom, which was formerly known as Instacom, was expected to record pre-tax margin rates of between 10 and 12 per cent, which was above the Kuala Lumpur Construction Index average of eight per cent.
“Vivocom’s expected operating margin is illustrative of its business model in project management and sub-contracting.
“Its positions in the construction value chain enables the reduction for construction cost of tender, performance bonds and mobilisation fee,” it said.