We remain positive on the growth trajectory of Vizione Holdings Bhd ("Vizione") following the recent strong quarterly financial results. As such, we upgrade our target price to RM 1.20 based on 10x PER FY20 premised on the higher end of small-mid cap construction companies' FY20 PER range of 6x-1 lx. We believe the valuation is justified due to Vizione's decent net margin and solid orderbook. 

Since our initiation report on 29 October 2018, the Group continues to deliver favourable results amid the challenging construction sector with its share price improving from RM0.91 to RM1.02. Vizione recorded more than four-fold jump in net profit to RM34.5m for 1H FY2019 year on year. 2Q FY2019 also marked the fifth consecutive quarter-on-quarter growth in net earnings after the acquisition of Wira Syukur Sdn Bhd. Additionally, net margins have also improved during the quarter due to prudent measures on undertaking certain higher margin private property and infrastructure projects. 

Vizione has been consistently winning contracts including the recent RM377.6m worth of road works projects in Kota Kinabalu, Sabah. This brings the group's total construction orderbook to hit RM3.95b providing earnings visibility until 2022. Among the more notable projects is the RM407.5m Penang Mega Infrastructure package 2 with commencement expected by 1H2019. The project is deemed as a stepping stone for the Group to secure the remaining packages of the mega project with total value estimated at RM6.3b. 

Lastly, Management has also indicated that they are looking to expand into concession, property development as well as renewable energy to attain more recurring income in the future. With current net cash position of RM29.3m, we believe the healthy balance sheet provides ample room for further expansion especially in concession businesses. Net earnings for FY19 is expected to grow by more than double on the back of higher earnings visibility.

Source: Rakuten Research - 22 Jan 2019