KUALA LUMPUR (June 27): Vivocom International Holdings Bhd's shares declined as much as 10.2% on reports Vivocom chief executive officer (CEO) Datuk Seri Dr Yeoh Seong Mok may retire early.
At 12.05pm, the stock shed as much as 2.5 sen to 22 sen, before paring losses to 22.5 sen. A total of 33.77 million shares were traded.
The counter was the second most active stock traded on the local bourse this morning.
After hitting a slump in the beginning of last year, Vivocom, formerly known as Instacom Group Bhd, saw a sharp uptick in the value of its shares from 8.6 sen on Sept 22, 2015, after the company proposed to raise its stake in aluminium window and door manufacturer Neata Aluminium (M) Sdn Bhd, to a five-year high of 36 sen on May 12 this year.
However, the stock has been on a steady decline since.
Year to date, the stock has dropped 30.54%, underperforming the FBM KLCI, which fell 7.8%.
The Edge Weekly, citing sources, reported over the weekend that Yeoh, who turns 60 this year, may be retiring early from the construction outfit.
Yeoh, who was appointed CEO of Instacom on Nov 2 last year, was instrumental in channelling construction contracts from China's China Railway Construction Corporation Ltd (CRCC).
The Edge Weekly said Yeoh's early retirement may throw a wrench into the group's plan of achieving RM3 billion in revenue by 2018 as the bulk of the company's contract wins were secured through Yeoh's relationship with CRCC.
It will also pose a challenge for the company to achieve its target of RM600 million in revenue this year as construction projects are progressing slower than expected, the source was quoted as saying.
In a report, CIMB Investment Bank analyst Marcus Chan said the research firm "understands" that a transition plan is being put in place for Yeoh to remain within the group, with a less strenuous non-executive or advisory role.
Chan said that while the uncertainty around the group's leadership may mar sentiment in the near term, the research firm believes Vivocom's long-term prospects remain bright as Yeoh will still remain in Vivocom where his relationship with CRCC will still bring forth more contracts for Vivocom. Furthermore, Vivocom is expanding its business partnerships beyond CRCC, citing new a new partnership with Zhonghe Huaxing Development (M) Sdn Bhd, to collaborate on future construction projects.
Zhonghe Huaxing is a subsidiary of China Nuclear Industry Huaxing Construction Company Ltd, which in turn is controlled by state-owned China Nuclear Engineering Group Corp.
Chan also said Vivocom's RM900 million in new contract wins this year have been from non-CRCC clients, a testimony that it is not reliant on only CRCC for job wins.
He said the firm expects Vivocom to announce a bonus issue in July, and Vivocom's second quarter ended June 30, 2016 (2QFY16) results at end-August should continue the momentum of the strong earnings following 1QFY16's decent showing.
He said the earnings projection serves as potential re-rating catalysts for the stock.
"We maintain our 'add' rating on the stock, with unchanged sum of parts (SOP)-based target price (of 78 sen)," he said.
"We value the construction business at 10.5 times, based on a 30% discount to the average sector price to earnings ratio of 15 times, comparable to other pure contractors of this size and in line with the expansion in sector multiples over the past six months given the bullish outlook of the construction sector," he added.
VIVOCOM (0069) - Hot Stock: Vivocom declines 10% on reports CEO may retire early
http://www.theedgemarkets.com/my/article/vivocom-declines-10-reports-ceo-may-retire-early
