VICOM

luff... Valuebuddies are supporting the Vicom share price.
No wonder the price is so sticky..

But seriously, as a yield stock, it is rather fantastic(much better than REITs as Nick had pointed out).However, I do not forsee that Vicom is going to be able to grow its revenue significantly in the near term(Or am I wrong??..haha)

The vehicle population is going to slow or even decline although many of vehicles will have to go for yearly inspections soon.
But thanks to Minister Lui, there will be more old SBStransit buses that will be put into service and hence, will have to go to Vicom for inspection.

I feel this could turn out to be one of the most excellent recession proof business.

if you look at our roads and crazy traffic these days rain or shine there are just cars and more cars everywhere singaporeans are just mad about their cars and as cars age more inspection required *ka-chiing*

Fat profit margins

2010 - 26%
2009 - 25%
2008 - 21%

source: vicom

Vicom's Q2 results makes interesting reading.....
http://info.sgx.com/webcoranncatth.nsf/V...9002F809E/$file/VICOM_2Q2011.pdf?openelement

Vicom's steady and gradual growth in revenue, and pattern of adding approx. $2.0m a year in incremental NP, are almost predictable. However, we should not forget that $2.0m a year in incremental NP will translate into a decreasing rate of profit growth over time! So we also have to ask ourselves how high a PER we should be prepared to pay for Vicom's future earning and dividend streams. I am highlighting this point based on the fact that in line with the overall market, Vicom's share price - last done at $3.45 - has so far corrected 8.7% from its recent high of $3.78 (recorded on 18Jul11). The cue from Mr Market seems to suggest that Vicom's share price should take a respite from its continued advance of the recent past!

(12-08-2011, 01:50 PM)dydx Wrote: Vicom's steady and gradual growth in revenue, and pattern of adding approx. $2.0m a year in incremental NP, are almost predictable. However, we should not forget that $2.0m a year in incremental NP will translate into a decreasing rate of profit growth over time! So we also have to ask ourselves how high a PER we should be prepared to pay for Vicom's future earning and dividend streams. I am highlighting this point based on the fact that in line with the overall market, Vicom's share price - last done at $3.45 - has so far corrected 8.7% from its recent high of $3.78 (recorded on 18Jul11). The cue from Mr Market seems to suggest that Vicom's share price should take a respite from its continued advance of the recent past!

Hi dydx,

I'd like to bring up a point which may be pretty academic but which I feel deserves to be addressed.

Even though the incremental net profit improvement for VICOM will decrease over time (as a %), the fact that the business continues to generate FCF over time and that the cash balance will keep growing (and by extension, it would also imply that the excess cash will translate into higher dividends over time); does this mean that Mr. Market should factor in the higher dividends over time and accord a higher valuation for VICOM based on its business model?

Thanks!

(12-08-2011, 06:56 AM)yeokiwi Wrote: luff... Valuebuddies are supporting the Vicom share price.
No wonder the price is so sticky..

But seriously, as a yield stock, it is rather fantastic(much better than REITs as Nick had pointed out).However, I do not forsee that Vicom is going to be able to grow its revenue significantly in the near term(Or am I wrong??..haha)

The vehicle population is going to slow or even decline although many of vehicles will have to go for yearly inspections soon.
But thanks to Minister Lui, there will be more old SBStransit buses that will be put into service and hence, will have to go to Vicom for inspection.

Vehicle testing takes up 30% of its revenue and 36% of its EBITDA in FY 2010. SETSCO (which deals with non-vehicle testing and inspection) is the largest contributor with a 61% share of its revenue and 39% of the EBITDA. The remaining income comes from its property rental division. In other words, since the vehicle testing division only accounts for a third of its EBITDA, local vehicle growth (or decline) alone wouldn't translate to overall revenue growth (or decline) for Vicom. We must look at its SETSCO division growth prospect (or competition) and also account for the possibility of M&A in the property rental division.

(12-08-2011, 02:36 PM)Musicwhiz Wrote:

(12-08-2011, 01:50 PM)dydx Wrote: Vicom's steady and gradual growth in revenue, and pattern of adding approx. $2.0m a year in incremental NP, are almost predictable. However, we should not forget that $2.0m a year in incremental NP will translate into a decreasing rate of profit growth over time! So we also have to ask ourselves how high a PER we should be prepared to pay for Vicom's future earning and dividend streams. I am highlighting this point based on the fact that in line with the overall market, Vicom's share price - last done at $3.45 - has so far corrected 8.7% from its recent high of $3.78 (recorded on 18Jul11). The cue from Mr Market seems to suggest that Vicom's share price should take a respite from its continued advance of the recent past!

Hi dydx,

I'd like to bring up a point which may be pretty academic but which I feel deserves to be addressed.

Even though the incremental net profit improvement for VICOM will decrease over time (as a %), the fact that the business continues to generate FCF over time and that the cash balance will keep growing (and by extension, it would also imply that the excess cash will translate into higher dividends over time); does this mean that Mr. Market should factor in the higher dividends over time and accord a higher valuation for VICOM based on its business model?

Thanks!

For sure dividends have been increasing incrementally, interim and final as follow:

2007 - 0.03 and 0.0275 plus 12.5c special
2008 - 0.05 and 0.425
2009 - 0.058 and 0.06
2010 - 0.063 and 0.066 plus 0.032 special
2011 - 0.069 and ???

There is nothing to suggest there is a pattern of $2.0m annual incremental NP. Not yet anyway. The profit after tax for the last five years being:-

2006 - $10.287m
2007 - $13.808m
2008 - $16.185m
2009 - $20.339m
2010 - $22.349m
2011 - $12.221m interim profit

Annualised the earnings for 2011 may well turned to be approximately $2.0m higher than the year 2010.....repeating the quantum increase for 2010 over the year 2009.

Let's wait and see

What happened to vicom?

Someon threw one lot to the buyer at 3.35
Then came the queue 10 lots for 3.36
Strange?
Fishing?

(02-09-2011, 11:16 AM)orang Wrote: Someon threw one lot to the buyer at 3.35
Then came the queue 10 lots for 3.36
Strange?
Fishing?

Nothing strange that I can tell. There was a desperate seller who sold 1 lot to the buyer at $3.35, that's all.

The interim dividend of 6.9 cents/share was received by me on August 31, 2011.

(Vested)

(02-09-2011, 11:43 AM)Musicwhiz Wrote: There was a desperate seller who sold 1 lot to the buyer at $3.35, that's all.

IMHO, at the current price range, the word "desperate" suits the buyers more than the sellers.