VIVOCOM (0069) - VIVOCOM will be never be the same under CNQC group







CNQC is a property developer and contractor listed on the HKEx with a market valuation of HKD4.1 billion (~S$721m). The company currently operates in three main business segments—property development in Singapore, construction in Singapore, and foundation and superstructure construction in Hong Kong and Macau. Astute followers of the local real estate market would be aware that CNQC is actually a reputable player in Singapore's property development scene, with 18 years of track record and projects across the whole of Singapore. The company's property development activities here have been focused on the development and sale of condominiums and executive condominiums. 
The largest shareholder of CNQC is Guotsing Holding Company Limited, which controls 65.23% of CNQC's outstanding shares as at 30 Jun 17. Guotsing is owned by Dr Du Bo (former Chairman of CNQC) and Qingdao Qingjian Holding Co Staff Shareholding Union (an employee committee). As such, we see a strong alignment of interest between management and investors. The other substantial holder is China Great Wall AMC (International) Holdings Company Limited (9.93%), which is a state-owned enterprise.
The company continued to generate robust cash flows during 1H17, and its debt/EBITDA ratio improved to 4.4x in the twelve months ended 30 Jun 17 (FY16: 6.6x). CNQC has also been consistently more profitable than its peers, achieving an average return on invested capital of 17.4% in the five years ended 2016. As a reference, Bloomberg data indicates that the median five-year average ROIC of all construction and engineering companies listed in Singapore or Hong Kong was 10.5%.
One of CNQC's latest project—the Le Quest at Bukit Batok—attracted strong sales on its first day of launch in August, with 280 of the project's 516 units sold within hours. The take-up was an oversubscription as only 200 units were initially released for sale. Below link was all the lastest housing project under its subsidiary CNQC Qingjian Realty is one of Singapore’s Top 10 Developers in Singapore for Consecutive 3 years.
So what is CNQC plan for Vivocom after major shareholding acquisition?
1) In order to bring more confidence in Vivocom, CNQC will change Vivocom International Berhad to CNQC International (Malaysia) Group Development Berhad. Like what they did CNQC Myanmar & Singapore. But in order to do so, CNQC may continue to buy share holding in open markets or through proxy Macquarie PP to raise their holding to 51%.  This move enaBle Vivocom has lessfreefloating shares and more stable share price. 
2) Since Vivocom has been sub contractor in few PPA1M housing projects, CNQC wil make Vivocom as PPA1M housing developer rather than just a subcontractor. If Vivocom become project owner and built houses themselves enable Vivocom has better profits margin and higher  revenue in coming future. In term of Financial Funding, CNQC shall able to back up Vivocom . Not to forget Neata also doing Aluminium Fabrication that also save more cost for supplying aluminium frame to its own condominium project. 
3) Bidding more big construction  infrastructure  tender like ECRL, HSR, Gemas JB Railway, MRT, Kelantan Airport. In the past, CNQC has went aboard and win projects in Indonesia & Yangdon Myanmar.
4) Moving Vivocom to Main Board. With more and more construction revenue coming in the future, Vivocom no longer is a ACE counter in long term. Vivocom already met criteria for Main Board Listing.
Its a matter of time, they will announce the plan to share holders.