Hong Kong Listed Main Board Company CNQC International buys into Malaysia’s Vivocom seeking sustainable growth in line with its ‘One Belt, One Road’ strategy!

October 13, 2017 | By | Reply More

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The Board of Directors of Vivocom Int’l Holdings Berhad (“Vivocom”) today announced that its major shareholders have signed term sheets with CNQC International Holdings Limited (“CNQC Intl”) whereby CNQC Intl intends to acquire up to 970,266,423  Vivocom shares, representing approximately 29.15% equity interest in Vivocom, via a share swap arrangement with Vivocom’s two largest shareholders. A definitive share swap agreement setting out the terms and conditions of the share swap arrangement will be agreed and signed between the parties subsequently.

Upon the successful completion of the share swap agreement, CNQC Intl will emerge as the largest single shareholder in Vivocom.

ABOUT CNQC Intl – it is part of a construction powerhouse, the Qingjian Group accredited as one of China’s Top 500 Enterprises and ENR Top 250 International Contractors!

CNQC Intl is currently listed on the Main Board of the Stock Exchange of Hong Kong Limited, with a market capitalisation of approximately HK$4.02 billion (equivalent to approximately RM2.18 billion) as at early October 2017. As at 31 August 2017, the total issued share capital of CNQC Intl is HK$14.29 million comprising 1.43 billion ordinary shares of HK$0.01 each. For the financial year ended 31 December 2016, CNQC Intl registered a net profit after tax of HK$669.1 million (equivalent to approximately RM363.1 million) on the back of a turnover of HK$8.61 billion (equivalent to approximately RM4.7 billion).

CNQC Intl is a contractor in the Hong Kong foundation industry, principally engaged in the foundation business and machinery leasing business in Hong Kong and Macau.

Since 1999 it is already well established in Singapore where it has built a solid reputation for being a respected and proven property developer and contractor primarily engaged in the development and sale of condominiums in the Outside Central Region of Singapore, with 3 subsidiaries entitled with the highest classification of “A1” grading registration under the Singapore Building and Construction Authority (BCA).

In 2012 CNQC Intl was ranked number 1 “in terms of the number of property sales in Singapore among foreign property development enterprises”.

To date, the total sales of property projects by CNQC Intl in Singapore amounted to approximately HK$50 billion. The Company was also accredited as one of the “Singapore Top 10 Developers” by BCI Asia, and awarded multiple honours for its quality property developments and construction projects.

CNQC Intl, in turn, is part of the Qingjian Group in Qingdao, China. The Qingjian Group is one of the first batch of premium quality construction enterprises of the Ministry of Construction in China.

Qingjian Group is continuously accredited as one of China’s Top 500 Enterprises and ENR Top 250 International Contractors and has won awards including the highest honour in China’s construction industry of engineering quality – the “LUBAN AWARD” (the construction industry’s equivalent to the OSCAR AWARD).

According to the Engineering News-Record annual Top Lists, the Qingjian Group’s ranking was at 98th and 81th on the ENR TOP 250 International Contractors in 2014 and 2015, respectively, and is regarded within China’s construction industry as one of its best private companies to have successfully ventured abroad.  In 2014, the Qingjian Group last posted annual turnover of US$7.744 billion, with international income at US$1.315 billion and domestic revenue of US$6.429 billion.

CNQC’S BRANDING AND SUCCESS TO LIFT VIVOCOM ALOFT!

Accordingly with CNQC Intl eventually emerging as the largest single shareholder in Vivocom, it would augur well for its future success as CNQC Intl seeks to transform Vivocom into a real estate development and construction powerhouse in Malaysia in the long term.

The fact that CNQC Intl will eventually become the largest shareholder of Vivovom bodes well for the Company:

  • From the operations perspective, Vivocom can now tap onto superior industry techniques and latest construction expertise from CNQC Intl which had enjoyed tremendous successes in delivering multi-billion projects throughout Singapore.
  • From the share price perspective, the fact that CNQC Intl has a strong presence in Hong Kong as a Main Board listed company would result in growing confidence for Vivocom as a stock to watch and with tremendous potential for growth.

Mr. Choo Seng Choon, Executive Director for Vivocom stated proudly: “Since receiving the news, we are indeed very excited about this strategic acquisition by CNQC Intl as it represents tremendous upside potential to the Company in terms of the confidence boost it gives to the entire Board of Directors, the management team and the market.”

“With the branding of CNQC Intl and its proven track record in Singapore, we are confident of winning more projects and getting invited to participate in more mega projects in the foreseeable future, by both the private and government sectors,” added Mr Choo.

With the entry of CNQC Intl which is backed by its proven track record of having completed more than 60 constructions projects and delivered more than 30,000 residential units, it is conceivable that CNQC Intl will grow and uplift the capability of Vivocom to undertake more multi-million or even multi-billion projects in the Malaysian construction industry.

From a valuation perspective, at Vivocom’s share price of 13 sen as at 6 October 2017, the company was traded at a price/earnings ratio of 8.4 times based on historical basic earnings per share of Vivocom of 1.54 sen per share as extracted from its annual report 2016. This represents a huge “discount” to Malaysia’s construction sector in which the price/earnings ratio is almost double at approximately 15 times. At 15 times, Vivocom’s share price would hypothetically be traded at 23 sen, providing significant growth potential for its shares moving forward !

Certainly, the Vivocom Group had been positively covered by analysts at one stage with five research houses namely, CIMB, MIDF, Mercury Securities, TE Research and SJ Securities covering the Company with “BUY” calls setting target prices ranging from 40 sen to 75 sen per share, signalling strong upside potential and capital appreciation. In its most recent update report dated 5th September 2017, research house MIDF Research has continued to maintain a BUY call on Vivocom’s shares with a target price set at 40 sen per share.

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