VICOM

(10-02-2018, 10:58 AM)CY09 Wrote: http://infopub.sgx.com/FileOpen/VICOM_FY...eID=488445

Despite a lower profit and cash generation ability falling by approx 10% year on year, Vicom has announced a huge 22.88 cents dividends. This equates to a payout of about 20.3 mil cash.

Vicom's cash flow and balance sheet can definitely sustain this continuous high dividends. I will not be surprised if Vicom will continue to maintain annual dividend payout of 33-34 cents per share. After all, its parent company, CDG is also in need of cash.

At current price of $5.83, Vicom is definitely a good dividend stock to own. A balance sheet which is not leveraged, a business capable of generating 6.1% cashflow yield based on current price, it is better than our teleco stocks (highly geared and producing only about the same yield as Vicom)

I guess continuing a payout of 33-34cents/share is contingent to parent CDG's needs, than anything else. This cash generating ability has been there for a long time and the only fact that has changed, is CDG's need for cash.

There are some thoughts about privatization of VICOM by CDG. It may take ~150-200mil to make a robust bid from CDG to take over the remaining ~33% stake it doesn't own - While it was pausible a few years ago, but i thought the chances are remote now, especially with the 600mil acquisition of LCR (300mil of cash). Also, CDG seems to signal that it prefers to allow the golden goose to continues to lay eggs, than bring it home from the market - with this record announcement of dividends.

(12-02-2018, 11:10 AM)weijian Wrote:

(10-02-2018, 10:58 AM)CY09 Wrote: http://infopub.sgx.com/FileOpen/VICOM_FY...eID=488445

Despite a lower profit and cash generation ability falling by approx 10% year on year, Vicom has announced a huge 22.88 cents dividends. This equates to a payout of about 20.3 mil cash.

Vicom's cash flow and balance sheet can definitely sustain this continuous high dividends. I will not be surprised if Vicom will continue to maintain annual dividend payout of 33-34 cents per share. After all, its parent company, CDG is also in need of cash.

At current price of $5.83, Vicom is definitely a good dividend stock to own. A balance sheet which is not leveraged, a business capable of generating 6.1% cashflow yield based on current price, it is better than our teleco stocks (highly geared and producing only about the same yield as Vicom)

I guess continuing a payout of 33-34cents/share is contingent to parent CDG's needs, than anything else. This cash generating ability has been there for a long time and the only fact that has changed, is CDG's need for cash.

There are some thoughts about privatization of VICOM by CDG. It may take ~150-200mil to make a robust bid from CDG to take over the remaining ~33% stake it doesn't own - While it was pausible a few years ago, but i thought the chances are remote now, especially with the 600mil acquisition of LCR (300mil of cash). Also, CDG seems to signal that it prefers to allow the golden goose to continues to lay eggs, than bring it home from the market - with this record announcement of dividends.

Can milk the other cow on the CDG farm.

There is actually a ~3% increase in vehicle inspection prices (2sgd for 1st time check, 1sgd for subsequent checks) from Nov2017 onwards from chairman's AR17 message. I don't own a sporean car and so i wouldn't know (well, even if i did, i doubt i will realize i need to pay 1sgd more compared to 2 years ago).

Coincidentally, STA prices have also raised and matched to VICOM (talk about "managed" duo-poly)

http://www.vicom.com.sg/Portals/0/PDF/fi...ar17-2.pdf

now tat the LCR ~600M purchase is off the table, 
your guess is as good as mine, where else and wat most likely would they want spend the money on 

VICOM is selling the SETSCO site back to JTC for ~21.1mil with JTC throwing in ~2.6mil for relocation costs. The current site is recorded with a book value of ~9mil and there will be a substantial accounting gain but after accounting for all costs and including the relocation costs, it seems like the accounting gain is only ~7.6mil.

Back of the envelope calculations: Cost = Payment - gain = 21.1 + 2.6 - 7.6 = 16.1mil. Since BV of the HQ is 9mil, the other costs for this relocation is 16.1- 9 = 7.1mil! I would say it is alot of money to relocate and also to restore the existing site to give back to JTC! (both sites look quite comparable in size/land area)

VICOM selling current SETSCO site back to JTC: http://infopub.sgx.com/FileOpen/SURRENDE...eID=536523

VICOM buying a new site from MIT: http://infopub.sgx.com/FileOpen/PURCHASE...eID=523983

Govt buys this industrial land at 1x plot ratio. Shuffled some paper, turns into 3X plot ratio residential condo land...magic hahah
But must relocate everyone on that small stretch...

https://goo.gl/maps/TVYZVcKfNkr

23.17 + 8.62 = 31.79

Financial Results for the Year ended 31 December 2018 ("FY 2018")

Highlights:
1. Total revenue of $100.1 million for 2018 was $3.0 million or 3.1% higher than 2017 due to higher business volumes
2. Operating profit of $39.7 million for 2018 was $9.2 million or 30.3% higher than 2017
3. Profit before tax of $41.1 million for 2018 was $9.2 million or 28.6% higher than 2017
4. Taxation for the Group of $6.0 million for 2018 was $0.9 million or 18.6% higher than 2017
5. Profit attributable to Shareholders of the Company of $34.7 million for 2018 was $8.2 million or 30.9% higher than 2017
6. Total Equity increase by $2.5 million to $151.8 million as at 31 December 2018 due mainly to the profits generated from operations offset by payment of dividends.
7. Total Assets increase by $10.7 million to $190.2 million as at 31 December 2018 due to the increase in Non-Current Assets of $10.7 million.
8. Total Liabilities increased by $8.2 million to $38.4 million as at 31 December 2018 due mainly to the increase in provision for relocation costs of $7.0 million and increase in Tax Provision of $1.2 million
9. The Directors propose a tax-exempt one-tier final dividend of 23.17 cents (2017: 22.88 cents) per ordinary share and a tax-exempt one-tier special dividend of 8.62 cents (2017: nil cents) per share.

More details in http://infopub.sgx.com/FileOpen/VICOM_FY...eID=543029

Without a free vehicle testing market, Vicom has been able to earn abnormally fat returns and margins, consistently.

Since Vicom is one of only two players in the market, there is no incentive for both to compete and offer value to customers. Prices can be raised every year without worry of a fall in customers.

And because vehicles inspection is mandatory, the vehicle inspection fees are a form of tax on vehicle ownership. However, these fees are collected by a private enterprise, and not the government.

Criticism of such onerous 'taxes' are unlikely to win support in public discourse, as private vehicle ownership is perceived to be a luxury that is afforded only by the minority.

Hence, Vicom is the government's gift to CDG, and shareholders clever enough to own it. And is at least part of the reason why Vicom/CDG did not (see the reason to) innovate in so many decades.

The secret to VICOM's moat is not regulation nor the duopoly, but the pittance of how much it cost to inspect your vehicle - It costs 62sgd every 2years. First benchmark this to the cost of owning the vehicle (>100k) and then the other necessary costs of operating one on a monthly basis (insurance = 1XXsgd, season parking = 1XXsgd, fuel = 1XXsgd), and 62sgd every 2years (or yearly if vehicle >10years old) becomes really a negligible cost. It will probably fly under the radar for some time.

But of course, that doesn't stop some folks (eg. the taxi MP) from trying to poke holes into the inspection regime/prices every now and then.

https://www.mot.gov.sg/news-centre/news/...te%20Cars/

https://www.mot.gov.sg/news-centre/news/...20Onwards/

(25-10-2019, 12:41 PM)weijian Wrote: The secret to VICOM's moat is not regulation nor the duopoly, but the pittance of how much it cost to inspect your vehicle - It costs 62sgd every 2years. First benchmark this to the cost of owning the vehicle (>100k) and then the other necessary costs of operating one on a monthly basis (insurance = 1XXsgd, season parking = 1XXsgd, fuel = 1XXsgd), and 62sgd every 2years (or yearly if vehicle >10years old) becomes really a negligible cost. It will probably fly under the radar for some time.

But of course, that doesn't stop some folks (eg. the taxi MP) from trying to poke holes into the inspection regime/prices every now and then.

https://www.mot.gov.sg/news-centre/news/...te%20Cars/

https://www.mot.gov.sg/news-centre/news/...20Onwards/

To be fair anything statutory / mandatory and yet privately owned with little competition is a potential gravy train... and has been used regularly and globally. For example direct award of VEP system to TCSens Sdn Bhd.