Wednesday 3 October 2018

Vizione - Total Order Book vs Outstanding Order Book

I am not impressed how Vizione reported its order book in the latest annual report and quarterly results announcement, which I deem it as being misleading.

In the BFM interview today, Dato' Ng Aun Hooi, the Managing Director of Vizione said its order book of RM3.9b is about 7 times of its market cap.

For construction companies, the OUTSTANDING order book is a more common and appropriate number used to gauge the earnings visibility of a construction company, and not the "total order book" used by Vizione in its reporting.

An outstanding order book excludes revenue that has been recognised, reflecting only remaining revenue to be recognised from existing jobs in hand, whereas the total order book used by Vizione includes revenue that has been recognised previously.

The RM3.9b shown in FY18 annual report was total order book, and not OUTSTANDING order book. You get RM3.9b by summing up all the contract values shown in the diagram above.

WHY DIDN'T THE COMPANY REVEAL ITS OUTSTANDING ORDER BOOK, which is more meaningful, in its quarterly earnings announcements and annual report? 

Note that majority of the order book comes from private commercial projects. Vizione's investors should find out:

1. What are these projects?
2. Are all of them under implementation currently? Did the company include projects under planning in its order book?
3. Is it prudent to include projects that are still under planning and the implementation timelines are still uncertain?


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