KUALA LUMPUR (Nov 19): CIMB IB Research has initiated coverage on Instacom Group Bhd at 23 sen with an “Add” rating and target price of 72 sen and said Instacom (to be renamed Vivocom) will morphe into a potential giant construction company, with the asset injection of Neata group.

In a noet Nov 18, the research house said the outstanding orderbook of RM2 billion could rise to RM5 billion over the next 1-2 years.

The newly renamed Vivocom is the in-house contractor for global Chinese construction giant, CRCC in Malaysia and South East Asia.

“We initiate coverage with an Add rating and SOP-based target price of 72 sen, valuing the construction business at 9x FY17 P/E.

“We believe that Vivocom has massive P/E rerating potential given the large valuation gap with its construction peers and zero analyst coverage.

“It is trading at FY17 fully-diluted P/E of 3.0x, 80% discount to the sector FY17 P/E of 14.5x which is unjustified given 456% FY15-17 EPS CAGR. On a P/BV basis, the stock is also very cheap, trading at 0.9x FY17 P/BV versus FY17 ROE of 48%,” it said.