Can Vivocom Continue its Growth to Greater Heights?
In 8 October 2012, Instacom Group Berhad was established when Instacom Engineering Sdn Bhd completed the restructuring and reverse take-over of I-Power Berhad. Consequently, I-Power Berhad changed its name to Instacom Group Berhad. Subsequently on 27 January 2016, Instacom Group Berhad has changed its name to Vivocom International Holdings Berhad. The change of name is to strengthen the Group’s brand image and to better reflect the Group’s focus and aspiration to be a regional construction company.
Vivocom is an end to end solution provider with more than 10 years of experience and proven track records in the telecommunication industry, where it has a strong foothold in providing telecommunications network services to the telecommunications carriers and operators all over Malaysia. In addition, Vivocom also has close working relationship with major telecommunications infrastructure, hardware and equipment market players, which put the company in a good position to undertake subcontract telecommunications network services related jobs from these telecommunications infrastructure, hardware and equipment market players.
On 30 January 2015, Vivocom had completed the acquisition of 35% equity in Neata Group, which comprised Aluminium (Malaysia) Sdn Bhd ("Neata”) and its wholly owned subsidiary company, Vivocom Enterprise Sdn Bhd. On 5 November 2015, the Group increased its holding in Neata by acquiring a further 43.6% of the share equity of Neata, there making the Neata a subsidiary unit of Vivocom. This acquisition would give Vivocom a strong foothold in the robust and growing construction industry.
Based on Financial Year (FY) 2015 full year results, Vivocom achieved very close to a RM 100 million turnover, which is considered as a small to mid-size enterprise. Other aspects of the company’s latest financial results are illustrated in the table below.
As Vivocom has undergone a series of mergers and acquisitions, we will only consider the financial results of the past 3 years, starting from financial year (FY) 2013 as these results are more representative of the current company’s business.
Revenue of Vivocom has its ups and downs for the past 3 years, having FY2013 achieving the highest at RM 120 million while FY2015 come in second at RM 98 million then FY2014 at RM 66 million. The high revenue of FY2013 might be due to the shift in full year reporting month from the initial financial year end in Jun 2012 to Dec of 2013, giving the year an extra 6 months for revenue accumulation. As for net profit, similar trend is observed however there is a great fluctuation in net profit margin for the past 3 years.
In FY 2013, Vivocom achieved net profit margin of 20% while subsequent years are at 3% and 8% respectively. This fluctuation of net profit margin indicates that the company needs more time to stabilise its operations and business directions after the few acquisition exercise.
In terms of company’s debt, Vivocom has a low total debt to equity ratio of 0.12. More interestingly, the company’s total debt to equity ratio is in a declining trend, starting at 0.378 in FY2013 to 0.269 in FY2014 to today’s amazing 0.12 low debt business model. Such low debt and strong shareholder’s equity show that the company will be able to withstand tough economic downturn challenges in future.
Current ratio of 2.72 is a great sign of maintaining high current asset value in relation to its current liabilities; however Vivocom has to improve in its cash ratio figure at 0.36 by keeping more cash on hand as compared to its current liabilities. Being a service providing company it is important to maintain at least 0.5 cash ratio as the current assets that the company is holding will not be liquid enough to payoff current liabilities on time when needed.
As for dividend yields, Vivocom has not been paying dividends since its listing.
In conclusion, Vivocom’s main strength in their financial performance is their low debt business model. As for the other aspects, more time is needed to stabilise their financial figures since several acquisitions happened causing a paradigm shift in their business model from a telco tower builder to construction firm. Hence their current financial results might not be representative of the company’s true potential.
Recent announcement from Vivocom that the target revenue of FY2016 is RM760 million, which represents close to a 800% increase in revenue as compared to FY2015 due to strong performance in their construction business driven by projects from China Railway Construction Corp Ltd. This news release might be the main contributor of the recent share price surge. If the company hits its revenue target or even if they come close to it, Vivocom will be a gem not to be missed by fellow investors out there.
iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Vivocom
Vivocom is testing the old high resistance on the left side of the iVSAChart @ RM0.33-RM0.34. With diminishing volume at this resistance now coupled with upthrust (i.e. sign of weakness) on the week of 11th Apr, 2016, we will see profit taking from smart money.
In shorter term, we are seeing weakness and traders/investors are advised to wait for more sign of strength (green up arrow) before accumulating around RM0.29-RM0.30.
VIVOCOM (0069) - Holistic View of Vivocom with Fundamental Analysis & iVolume Spread Analysis (iVSAChart) 15 Apr 2016
http://klse.i3investor.com/blogs/ivsastockreview/95093.jsp
