Vivocom climbs in active trade, strong Q1 earnings seen

KUALA LUMPUR: Construction company Vivocom's shares and its warrants were traded higher in high volume on Friday as CIMB Equities Research sees strong first quarter earnings.

At 2.42pm, it was up two sen to 31.5 sen with 91.96 million shares done. Its warrants, WB rose one sen to 13.5 sen, both WC and WD warrants added 1.5 sen each to 22 sen.  

The FBM KLCI fell 6.77 points or 0.39% to 1,717.52. Turnover was 733.65 million shares valued at RM755.11mil. 

The broader market was weakening, as losers beat gainers 448 to 242 while 344 counters were unchanged.

CIMB Research said Vivocom’s share price has risen in the past two weeks (up 11%). 

“We believe this could be due to several reasons: 1) expectations of strong 1Q16 results, and 2) expectations of new contract awards,” it said.

CIMB Research believed Vivocom was likely to report strong Q1, FY16 results in mid-June 2016 that will beat its estimates. 

“In a recent newspaper report, executive director Choo Seng Choon guided for FY16 revenue of RM760mil, which is 33% higher than our estimate. Assuming similar net profit margins, this implies FY16 net profit of RM60mil or RM15mil per quarter,” said the research house.

CIMB Research said Vivocom was finalising the award of RM1.5bil worth of LOIs over the next three months. In addition, another RM500m in new building jobs in Ipoh were in the pipeline. Combined with the RM600mil in new contract wins announced year-to-date,

“Vivocom will be comfortably at RM2.6bil in new contract wins by mid-16. Vivocom will only require another RM400mil in wins for 2H16 to meet our 2016 estimate, which could be surpassed if the Gemas-Johor Bahru double-track is awarded by year-end,” it said.