Vibrant gameplay for Vivocom after rebranding


TA03057Previously known as Instacom Group Bhd (Instacom Group) with telecommunications solutions as a singular source of revenue, Vivocom Intl Holdings Bhd (Vivocom) is now a rising construction powerhouse with a constant flow of contract wins in its pockets and a first quarter of 2016 (1Q16) net profit that has surpassed expectations.

To strengthen the group’s image and to better reflect the group’s new focus and aspiration to be a regional construction group, Instacom Group changed its name to ‘Vivocom Intl Holdings Bhd’ on January 14, 2016.

Through its subsidiary, Instacom Engineering Sdn Bhd (Instacom Engineering), Vivocom has made its mark within the telecommunications industry as one of the leading services providers and for their superior engineering expertise in tower building.

Instacom Engineering currently undertakes works nationwide, concentrating in the Northern Region, Klang Valley and Southern Region of Peninsular Malaysia, as well as in Sabah and Sarawak.

“We count as our clients major telcos throughout Malaysia and also multinational companies,” Vivocom executive director Choo Seng Choon told the BizHive Weekly in an exclusive interview.

According to Choo, the telecommunications industry was very lucrative a few years back. However, he noted that over the years, profit margins have slipped.


This was one of the key reasons why Vivocom ventured into alumininium manufacturing and construction as it places the group now on an even more solid and stable footing in terms of having sustainable and recurring revenue growth.

“Our earnings base has been diversified and we have enhanced shareholder value,” he added.

Choo cited common elements between telecommunications and construction, explaining that in the latter, it all revolves around constructing towers – which bears similar principles to construction.

Aside from its involvement in the telecommunications industry, Vivocom had during the financial year ended 2015 (FYE2015) acquired 78.6 per cent of the equity in Neata Alumininium (Malaysia) Sdn Bhd (Neata), which in turn owns 100 per cent of Vivocom Enterprise Sdn Bhd (Vivocom Enterprise), a subsidiary engaged in civil engineering and construction.

This means that Vivocom is now actively and directly involved in the industries of telecommunications, manufacturing and construction.

“As a result, the enlarged Vivocom Group has now strategically diversified into new areas and viable businesses,” Choo said.

“On the operational side, since the acquisition of Neata and Vivocom (Enterprise), we have reaped benefits operationally in the sharing of resources and know-hows, and expansion of business opportunities through cross-marketing of products and services and cross-referencing of customers within the enlarged Vivocom Group.”


Group on a winning streak

The year is coming to its halfway mark, Vivocom has already impressed its stakeholders by winning a number of notable contracts mostly in the construction sector – and the group shows no signs of slowing down.

Choo highlighted that the construction industry will be the prime mover for the Malaysia economy especially in 2016 and 2017.


“With election looming in 2018, the government would be keen to start major projects to develop the nation,” the executive director observed. “Projects such as Gemas-JB Double Track, High Speed Rail, MRT2, etc would definitely help to pump (and) prime the economy as well as to build the nation further.”

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), Vivocom has transformed itself into a formidable player in the construction sector with strong orderbook replenishment capabilities backed by the group’s technical joint-venture with China Railways Construction Corporation Ltd (CRCC).

“Furthermore, its strategic position within the construction value chain would help to insulate its operating model from impending risks and recurring income from telecommunication assets would provide additional earnings support,” MIDF Research observed.

To date, Vivocom has secured projects totaling more than RM1.36 billion including RM594 million from CRCC Malaysia, a subsidiary of China’s construction behemoth CRCC.

The group  has a strategic relationship with CRCC Malaysia and is their in-house contractor as well as their Project Delivery Partner in Malaysia.

Independent of CRCC, the rising player in the construction industry also tries to land projects based on its own merits.

For example, in May 2016 alone, Vivocom announced that it has won two projects in Perak amounting to RM250 million while later in the month, the group also secured its maiden project in the state of Pahang amounting to RM46 million.

“Having successfully secured two projects totalling RM250 million in the state of Perak, we hope to top these two wins with another milestone as we continue to make inroads to establish a presence in the state of Perak,” said Choo.

On the the project in Pahang, Vivocom noted that it is expected to contribute positively to the earnings and net assets of the group – which further enhances its orderbook which had stood at RM1.36 billion previously – with expectancy of more project wins in the immediate future.

“The group’s construction pipeline has also swelled to about RM3 billion in contracts at the finalisation stage – with more projects wins coming up very soon,” Choo said.

As for Vivocom’s aluminium manufacturing arm, Choo revealed that just last month (April), the group announced that Neata was awarded RM37.5 million worth of contracts, with the latest projects being Third Avenue Cyberjaya for an amount of RM22.5 million, and Kemensah Development for an amount of RM15 million for the supply and installation of aluminium works.

This announcement was the latest in a series of solid wins for Neata.

“Since the acquisition by Vivocom last year, our business has grown by leaps and bounds, in particular our aluminium manufacturing and installation business.

“We have secured almost RM80 million worth of contracts during the past nine months alone, all from reputable developers with high end prestigious projects such as Third Avenue, Eclipse Residence and KL Gateway, to name a few,” said Neata’s business development director Albert Chia.

He added that Neata is also presently in final negotiation to secure another two projects worth up to RM30 million, and hopefully the award will be made by the end of April 2016.

Choo higlighted that as a pioneer in manufacturing aluminium windows, doors and façade systems, Neata has seen exponential growth in the last two years, emerging as one of Malaysia’s most respected players in the field since its establishment in 1989.

“Neata has built a reputation for supplying quality products to some of Malaysia’s most prestigious property and construction projects,” he said. “This latest win is certainly a ‘bonus’ for the Vivocom Group, and will further strengthen the Vivocom Group’s fundamentals.”

Choo noted that in setting the standard in quality, technology and design, Neata is synonymous with outstanding aluminium doors and windows from various parts of the world for those who value distinction and integrity.

He further noted that Neata’s affiliation with Schüco, FAPIM, Master S.R.L, Omec and the Naco only serves to reaffirm its reputation of being a supplier of ‘best of breed’ quality products.

“Neata is also currently in the process of expanding its production output at its plant in Semenyih, Selangor to cater for increasing orders from its growing client base,” he added.


Impressive 1Q16 results

Vivocom’s first quarter of 2016 (1Q16) results blew analysts away, with the group reporting in an annoucement on Bursa Malaysia that for the current financial quarter ended March 31, 2016, it had recorded a revenue of RM141.544 million and profit before tax of RM33.299 million.

“Compared to the previous corresponding financial quarter ended March 31, 2015, the group recorded an increase of RM134.506 million in revenue.

“The substantial increase in revenue was attributable to the consolidation of the results of the group’s new subsidiary companies, Neata and Vivocom Enterprise.

“The group’s profit before tax also increased accordingly by RM32.376 million,” Vivocom said

Choo noted that after accounting for taxation and minority interests, net profit came in at RM19.87 million, a 2,053 per cent giant of a jump from the RM923,000 posted in the previous corresponding period when it was still known as Instacom Group.

He pointed out that this huge jump in revenue and profits was attributed to Vivocom’s construction division which posted profit before tax of RM30.01 million on the back of RM125.81 million in revenue.

According to the research arm of CIMB Investment Bank Bhd (CIMB Research) in a company note on Vivocom, the group started financial year 2016 (FY16) with a bang.

Vivocom’s annualised 1Q16 net profit smashed CIMB Research’s expectations at 76 per cent above its previous full-year forecast while revenue tracked the research arm’s expectations but it had underestimated margins.

“1Q16’s margins were boosted by tail-end recognition of progress billings of several building jobs,” the research arm said.

CIMB Research noted that the strong 1Q results should calm investors’ earlier concerns about Vivocom’s execution abilities.

The research arm said that in particular, investors were sceptical about Vivocom’s ability to deliver above-sector margins.

Choo remarked recently that while they are delighted with the solid 1Q financial performance, Vivocom remains committed to working harder and delivering better and stronger results in the quarters to come.

“We will not rest on our laurels and the management team have all pledged to walk the extra mile to secure more projects in the foreseeable future and to ensure that our projects are delivered promptly and on time and to the highest standards possible for our clients.

“The board of directors (BOD) is confident and optimistic of the company’s future outlook, and is looking at various ways to rewards its loyal shareholders.

“Amongst the various options the BOD is considering is possibly a bonus share issue or a free warrants issue. Once finalised, they will be announced in due course,” he said.

Choo pointed out that Vivocom is currently the largest company on Bursa Malaysia’s ACE Market with a market capitalisation of approximately RM1.166 billion, assuming all its warrants is converted into shares.

“The company’s shares have consistently been traded in the Top 10 volume leaders in KLCI, showing remarkable volume and liquidity sustained over the last seven months when some seven billion shares were traded.

“The company also commands a huge shareholders base numbering some 15,000 shareholders,” he added.


What’s in store ahead for Vivocom?

For the year 2016, Vivocom’s target revenue group wide amounts to RM760 million with growth engines construction contributing 70 per cent, telecommunication (15 per cent) and manufacturing – aluminium (15 per cent). The following year, Vivocom targets RM2.1 billion in group wide revenues with contribution from growth engines construction (80 per cent), telecommunication (10 per cent) and manufacturing – alumininium (10 per cent).

In the quarters ahead, CIMB Research believed that progress billings from CRCC-awarded building jobs should start to flow through, such as Pavillion Hilltop, 1 Gateway Klang and Marinox Sky Villas Penang.


With a potential pipeline at letter of intent (LOI) stage of almost RM4 billion, CIMB Research is confident that Vivocom will be able to meet and possibly surpass the research arm’s RM3 billion contract win estimate for 2016.

“We understand that Vivocom is finalising another large Perak contract worth up to RM700 million in the coming weeks,” the research arm said.

Meanwhile, MIDF Research believed that Vivocom is able to clinch heavy, civil and heavy construction packages in upcoming quarters.

MIDF Research noted that it is likely that Vivocom will also emerge as the key sub-contractors for iconic projects such M101 Skywheel Tower in Kuala Lumpur as well as railways tracks for High Speed Rail (KL-Singapore).

“On this score, it is notable that Vivocom’s co-managing director/chief executive officer (MD/CEO) Datuk Seri Dr Yeoh Seong Mok has consulted more than RM400 billion worth of projects; often as a Project Delivery Partner (PDP) to CRCC,” the research arm said.

Through its partnership with CRCC, Vivocom is also expected to be driven by the ‘One Belt One Road’ (OBOR) policy.

OBOR is a development strategy and framework policy, proposed by the China’s President Xi Jinping in 2013 that emphasises on connectivity and cooperation between China and the rest of the continental landmass of Asia and Europe, MIDF Research explained.

The OBOR policy is divided into international trade connections, the land-based “Silk Road Economic Belt” (SREB) and

ocean-based “Maritime Silk Road” (MSR).

MIDF Research noted that the OBOR state-owned enterprises (SOE) such as China Railway Construction Corporation, Beijing Urban Construction Group, Sinohydro, China Harbour Engineering Corporation and Sinopec finances, develops and construct development projects along the ‘New Silk Road’.

“Their financial requirements are often backed by other SOEs such as China Development Bank, Bank of China and China Construction Bank,” it said.

MIDF Research further noted that New Development Bank, Silk Road Fund and Asia Infrastructure Investment Bank (AIIB) have illustrated on how OBOR could reform the global financial system and at the same time, offer a new path of infrastructure investment funding.

The research arm pointed out Asia Development Bank posits that from 2010 to 2020, Asia would require US$800 billion to beef up its infrastructure.

“Having said that, Vivocom has strategically positioned itself into a beneficiary of CRCC foray into Malaysia’s infrastructure demand hence it not surprising that its orderbook is poised to ascend

through large scale construction projects,” the research arm opined.

In addition, MIDF Research highlighted that Vivocom has attracted institutional foreign shareholding amounting to 5.4 per cent currently.

“Moreover, Beijing Construction Group has expressed interest to participate in their equity capital structure as well as appointing Vivocom as their local project delivery partner (PDP),” it said.

On a side note, MIDF Research also mentioned the fact that Vivocom will have cost advantage as the research arm is expecting lower construction cost due to the supply of building materials from the group’s subsidiary Neata which supplies aluminum doors and windows.

The research arm said that 95 per cent of Vivocom’s projects are for the construction of mixed/residential projects.

“Thus, the building materials supply from Neata facilitates the reduction in its bills of quantities (BQ),” the research arm added.

MIDF Research further noted that Vivocom possesses niche capabilities in telco engineering.

The group has specialised technical capabilities in mechanical and engineering in installation, commissioning; testing and erecting telecommunication towers up to 100 metres, and; civil and cabling with horizontal directional drilling (HDD) machinery

for fibre infrastructure work.

The research arm added that Vivocom earnings will be supported by recurring income from rentals of 50 telecommunication assets to telecommunication providers such as Maxis Bhd, U Mobile Sdn Bhd, Malayisan Communications and Multimedia Commission, Digi.Com Bhd and Celcom Axiata Bhd.