Vizione Needs To Work Harder To Sustain Momentum

Shalini Kumar

Vizione Holdings Bhd, which recently saw a rise in its share price, would need to do more to get investor’s confidence.

Analysts say that Vizione’s main earnings recently came from the inclusion of Wira Syukur (M) Sdn Bhd (WSSB), a construction firm which was injected into the company as part of a RM280 mil reverse takeover exercise that was completed on Oct 9 last year.

The improved prospects of the group is no doubt the reason investor interest has increased recently. However, a market observer the company must have the fundamentals to sustain its financial performance.

A local fund manager familiar with the company tells FocusM that while Vizione has been making headway in moving past its legacy issues, it remains to be seen if the group can deliver on its recent contract wins.

“The company has undergone restructuring and things are looking good with the recent construction wins they received. However, I maintain a degree of scepticism on this because their job wins so far don’t seem like solid projects, with the exception of their government-linked projects,” he said.

Domestic construction industry

The inclusion of WSSB impacted its share this year. In mid-January, Vizione’s share price rose after announcing its second quarter results on Jan 15. For its second quarter ended Nov 30, the company’s net profit jumped by more than 46 times to RM6.54 mil from RM141,000, while revenue increased by almost 15 times to RM147.3 mil.

A day after releasing its quarterly earnings, the group’s share price surged to 20 sen — the highest level since the group announced its capital reorganisation plan in 2016. Year-on-year, the stock has increased 39.1%, closing at 16 sen on Feb 28, from 11.5 sen on Feb 28, 2017.

In an email response, Vizione says growth for the group, moving forward, will continue to be focused on the domestic construction industry.

“We are optimistic that the current construction industry remains robust with strong domestic contract flows in the market. The group envisions that growth in the construction industry is imperative to lay the essential infrastructure to achieve the 11th Malaysia Plan to be a high-income nation,” he says.

To move forward, Vizione also embarked on a private placement initiative to raise capital. However, the fund manager says Vizione needs to be able to take on additional jobs more financial sources.

“They are also taking on a private placement to fund their projects, which makes me question their financial capability in taking on an increasing number of jobs. They’ve also done a number of other cash-raising exercises previously,” he says.

“My view right now is that it remains to be seen whether Vizione can deliver on whatever they have taken on. Their share price went up based on the inclusion of their related company, but after they announced the private placement, it went back down, so we shall have to wait and see,” says the fund manager.

Raising cash through private placement

On Feb 2, Vizione received Bursa’s approval to raise as much as RM67.1 mil via a private placement. The company is planning to use the proceeds to pay for construction project expenditures in Semenyih and Gombak.

The fund manager also explains that while construction projects help a lot in terms of revenue contribution, profit margins are quite thin.

“Bear in mind there are a growing number of companies which are going into construction at the moment, particularly for infrastructure projects. The type of infrastructure projects they intend to bid for also needs to be noted, as smaller players typically only win smaller parts of an overall project as a subcontractor therefore squeezing earnings opportunities further,” he says.

According to reports, Vizione is also aiming to increase its focus on infrastructure projects, rather than property construction jobs. Vizione’s FY17 annual report states that its current construction works consist of government housing projects in Sabah and Kelantan. They are expected to be completed within the next two years.

Recent contract awards

The group says it is currently bidding for more construction projects which may include government projects, private residential and commercial properties and infrastructure projects.

“The group is still in the tender stages for more projects, and we are confident that it will be able to secure projects to maintain or grow our order book,” says Vizione.

Vizione’s current tender book stands at RM2.9 bil while its order book is at RM3.6 bil which is expected to sustain the group’s financials until 2022.

Its order book includes jobs awarded by KL Northgate Sdn Bhd for the construction of apartments, shops and offices worth RM1.12 bil.

In October, Vizione secured a RM465 mil contract from Hektar Aneka Sdn Bhd to build five blocks of affordable homes and shoplots in Setapak under the Rumah Mampu Milik Wilayah Perseketuan (RUMAWIP) scheme, and a RM401 mil contract from Paragon Hemisphere Sdn Bhd to build four blocks of office suites in Ulu Langat, Selangor.

Both contracts were secured via Vizione’s wholly-owned unit WSSB. WSSB was acquired for RM280 mil last year, via the combination of cash and new shares of Vizione issued at 11 sen each.

Vizione had wanted to form a joint venture with Paragon Residencia Sdn Bhd, proposing to develop 256 units of 28-storey apartments. However, the JV was terminated in March last year after Vizione failed to raise the maximum RM73.16 mil from its rights issues with warrants which was completed in February.

Shedding its past

Current challenges aside, the company also had to deal with its difficult past. Formerly known as Astral Supreme, the group has been working hard towards shedding its troubled past. But the situation is slowly changing for Vizione.

“There will no longer be any legacy issues as the group has entirely sold the legacy business. The group also has no management leadership from the previous business in the current organisation,” says Vizione.

Vizione has been gradually changing its board of directors since March 2014. Most recently in December, one of the group’s executive directors Wong Kwai Wah announced his resignation from the group to pursue other interests.

At the same time, two other directors were appointed, namely Bee Jian Ming as executive director and Ng Fun Kim as a director.

“This will not have any impact on the group as Vizione now has new management and owners. The group has now been repositioned as a full-fledged construction player with strong track records,” says Vizione.