Vivocom: Construction our main driver for 2016

KUALA LUMPUR: Vivocom International Holdings Bhd, which targets a revenue of RM760 million for this financial year ending Dec 31, 2016 (FY16), expects the construction business to contribute 70-75% of its revenue, mainly driven by projects from China Railway Construction Corp Ltd (CRCC).
Executive director Choo Seng Choon said the group, which was formerly known as Instacom Group Bhd, was predominantly driven by its telco tower builder business. Now, the group is backed by three businesses, which are telco, aluminium and construction following acquisitions over the last two years.
“(For FY16) We hope to do RM600 million for construction, RM80 million for telco and RM80 million for aluminium. That’s our target. That will bring us to RM760 million revenue, which will be an achievement and will be quite comfortable for us.
“The main growth driver will effectively come from construction, by the sheer value of each contract and the volume that they take on,” Choo told SunBiz in an interview recently.
He said Vivocom, which prides itself with being one of the biggest market capitalisation on the ACE Market, aims to transfer to the Main Market within a year, after it delivers its FY16 results.
“2015 revenue is telco-driven so we’re not proven as a construction group yet. This year will be the first year we need to deliver. Once we deliver the results, next year we can start looking at it (moving to Main Market) already.”
Choo said while construction is expected to contribute the bulk of the group’s revenue, the remaining 10-15% will be split between aluminium and telco.
“Currently the bulk of our (construction) jobs is from a mixture of building and infrastructure projects but our main client CRCC is giving 40-50% of the current order book that we have,” said Choo, adding that the remaining portion comes from private entities and public companies.
He said Vivocom’s order book stood at RM2.7 billion and can keep the group busy for three years. Of this, construction makes up RM2.4 billion.
It is bidding for RM2 billion worth of construction jobs, including the M101 SkyWheel in the redevelopment of Kampung Baru, the Gemas-Johor Baru electrified double-tracking project, the Kuala Lumpur-Singapore High Speed Rail project, as well as the Tropics in Kuching by the Regal International Group.
“We hope to get an average of RM1-2 billion a year (order book replenishment) but depending on margins, track record payments and clientele. We do not have the cash muscle to fight with the big construction groups. We have to choose clientele that can pay us on time and that will allow us to roll,” said Choo.
Transforming from a telco tower builder to a construction firm, he opined that Vivocom’s change is not huge and that the skillsets are similar.
“When you’re a telco contractor, you also build and manage projects. The way we run the project is similar to construction. Only difference is the timing, scale and the duration is smaller. In telco, tower sites project takes six to nine months but for construction, each project is two to three years.”
Choo said the recent spectrum reallocation for telcos brings more work opportunities in terms of infrastructure change and upgrades, such as the change of equipment, rebuilding of towers or repositioning of sites, which could convert to an additional revenue of RM20 million to RM30 million per year for the telco arm.
Despite this however, Choo said the focus is still on growing its construction business which is a cash driven one.
“For telco, you lock in for five years with fixed rates but the volume can fluctuate. Because of the fluctuation, I don’t have economies of scale and I don’t have bargaining power for suppliers to get a cheaper rate,” said Choo.
On paying out dividends, he said it will likely come in 2018 once it has built its war chest.