VICOM

[BlueKelah]

Been a good stock to own since inspections started to spike. Probably gonna let go next year as the peak in COE issued 3 years before is reached, after which likely Vicom top line will see some reduction.

There was a record COE issue in around ~2003-2006 period (~4years period). As these cars aged, the peak in inspection came ~8 years later from 2013-2016 as they hit the 7/9th year mark. Based on my back of envelope calculation, the record COE issue in that 4 year period accounted for ~80% of all vehicles on the road (422k/514k).

The current record COE issue started 3 years ago as you mentioned. Another back of envelope calculation in the last 3 years show that this peak now accounts for ~50% (312k/615k) of all vehicles on the road. The peak seems to have been considerably diminished compared to the prior decade's peak, mainly as more owners extended their COEs beyond 10years. In the last 2-3years, there seems to be ~80k increase of >10year vehicles plying the roads, which is a record i reckon. These vehicles have to do yearly inspection.

The current record COE issue will probably start to "spike" VICOM's earnings in another 3-4 years time (2023-2024) when these cars start to enter their 7/9th year inspection schedule. But then again, it would be tempered down with those >10year cars that have their 5year COE expiring. I don't think a lot of people like to keep their cars beyond 15th year.

Moving on, I suspect the prior decade's "boom/bust" should be considerably tempered down moving forward, due to the record >10year car population providing some kind of anti cyclical offset to it. We will be probably getting more balanced vehicular age from now on.

 
Actually record new COE registration peaked in 2017 i think. 
https://www.lta.gov.sg/content/dam/ltawe...by_COE.pdf

125k (2017) -> 107k (2018) 
from this i would think record issuance peak in 2017 and has been coming down as per the economy getting bad from trade war etc. Not sure how much the 10year renewal numbers, do you have numbers? So from this likely 2020 is the peak for the 3 year checks to hit so likely VICOM will see a slowdown to revenue after 2020. In any case, yield is dropping as price goes up and at some point will not make sense to keep anymore as revenue and earnings unlikely to grow much.