VICOM

[weijian]

Thanks for the analysis - appreciate it. Still holding on to this after nearly 4.5 years and happy with the dividends so far.

Let's see how VICOM performs in 2016 - even if it won't be good, at least they have $100m on the Balance Sheet to tide them over.

Very similarly to what it did slightly more than 10years ago - buying SETSCO from Keppel Group and on hindsight (providing the stage for the next growth phase and never looking back). I believe this Mgt will repeat this successful formula in time to come, ie. buying a successful business (where they see a potential for them to add value to) which is itself a small (non core) portion of a larger group.

Blessed with a core cashflow protected heavily by regulations, Mgt has been patient to balance between rewarding shareholders VS loading up the elephant gun. With earnings topping out, personally my next critical indicator is to observe how this cash is being used - Are they going to fulfil this promise they made a couple of years back, now that hunting season looks to be coming really soon - It's never been more exciting as a VICOM shareholder now!

(vested)

[weijian]

A welcomed tailwind? These owners could be affected by the TDSR ruling that came in a couple of years ago. In addition, many of these current 10year old car owners got dirty cheap COEs 10years ago, compared to current stubborn levels.

http://www.straitstimes.com/singapore/tr...st-quarter

6,132 cars get COEs extended in 1st quarter

More than 6,100 motorists extended the lifespan of their cars in the first quarter of this year - nearly six times the number in the corresponding period last year.

That translates to one in five cars which had reached the end of their 10-year tenure during the period.

[violinist]

i am one of them.

[JanQuin]

Are rental cars including those under Uber and Grab subjected to the 6-monthly check, like Taxi?

[brattzz]

nope, they are private cars, so no need..

[JanQuin]

I wonder if LTA would put in regulation for such mandatory check in future since they offer similar services as taxi. If so, then it would be good news for VICOM.

[brattzz]

unlikely as they are still private cars....

[weijian]

Are rental cars including those under Uber and Grab subjected to the 6-monthly check, like Taxi?

hi JanQuin,
Actually the answer to your question can be derived from VICOM's page. Uber/Grab are under 'private hire car' criteria in the inspection price and schedule list:

http://www.vicom.com.sg/inspectionprice.htm

[JanQuin]

Hi weijian,

thanks for the link.

[Bytesizedinvestments]

Vicom Limited recently released its second-quarter earnings. The reporting period was for 1 April 2016 to 30 June 2016.

Revenue for the second quarter was $25.4 million, down 6.9% from the same quarter a year ago. Net profit attributable to shareholders also fell by 12.6% year-on-year to $6.6 million. Earnings per share was 7.47 cents in the reporting quarter, down 12.6% from the 8.55 cents recorded in the same quarter last year.

On a positive side, cash flow from operations came in at $6.5 million while capital expenditure (capex) was around $1.1 million. This provided Vicom with $5.5 million in free cash flow.

As of 30 June 2016, Vicom had $95.8 million in cash and equivalents and no debt. This is a decrease from the net cash balance of $100 million recorded at the end of last year.


Referencing LTA's monthly deregistration data, I note that for the full year of 2015, 100,859 cars deregistered. For the six months in 2016, close to 70,000 cars were deregisterd. Noticed that the total deregistration for the first 6 months was 70% of the total number of vehicles deregistered last year? In fact, the deregistration of the vehicles was higher in each of the month this year than last.

Also, I observed that more cars deregistered then registered since 2014.

Year                    New Registrations                 Vehicles De-registered
2014                    55, 588                                    57,721
2015                    86,068                                     100,859
2016 (Jan – Jul)   69,623                                     71,950

Taking LTA’s Jul 16 age distribution of motor vehicles, 46.2% of the 599,740 cars require inspection. This means that about 277,079 cars require inspection for the year of 2016. This results in a 5.5% drop in the total number of cars inspected, from the estimated 293,371 total cars inspected last year.

[Image: vicom-inspection-vehicle-projection.jpg]
The macroeconomic view of Vicom is slightly gloomy, with headwinds from both the government’s car-lite policies (long-term) and the higher deregistration of vehicles compared to registration (short-term: 2-3 years). Hence a drop in net profit in the short term wouldn’t be a surprise. However, the business is cyclical, which means that it will pick up once the up cycle swings in. Vicom has a strong and honest management and they are exploring all means to improve shareholder’s returns. It is worth monitoring Vicom’s key data for the fundamental inflection point.


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Financial Freedom can be achieved through prudence and patience capital.

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