VICOM

[FFNow]

Has anyone invested in VICOM? Is there future growth for VICOM since govt is discouraging car ownership and MRT lines are set to double in the future? I analysed VICOM and they have a strong balance sheet, good FCF generation and good dividends paid.

[violinist]

LP did an analysis of Vicom back in 2008: http://bullythebear.blogspot.com/2008/06/vicom.html
With market share of 70%, almost a monopoly.

[FFNow]

LP did an analysis of Vicom back in 2008: http://bullythebear.blogspot.com/2008/06/vicom.html
With market share of 70%, almost a monopoly.

Yea I read that before posting this thread. However, that is a bit outdated. I want to know will their market share be eroded going forward. Also, their subsidiary SETSCO is bringing in the bulk of their revenues (around 61% for FY2009), how is their growth plans like and will it continue increase its revenues and net profit going forward?

[jianjian]

hi all, allow me to share you my noob opinion.

at first i tot vicom was only only the vehicle inspection industry, later then i found out that they have this SETSCO subsidary too, which i totally have no idea what do they do.

their website is.. abit outdated and confusing to navigate.

overall i did a short analysis on the vehicle part.

1) Home car are only needed to go for inspection during their 3rd, 5th, 7th and 9th year.
Taxi are needed once every year or twice a year if im not wrong.
Buses are needed twice every year.
of cos, MRT trains are out of this.

2) according to http://www.lta.gov.sg/corp_info/doc/MVP0...ype%29.pdf , the overall number of vehicle in singapore isnt growing at a high %, and in my opinion, the taxi and buses number is perhaps, already at the peak in year 2010. ( becaouse of tourism and other event Eg YOG). so i expect a slower growing rate after year 2010.

3) according to http://www.lta.gov.sg/corp_info/doc/MVP0...nsp%29.pdf , which shows the number of vehicle having their inspection done, the growing number isnt that great.

4) there are 10 license vehicle inspection in singapore, 7 of them are mixture of VICOM and JIC, and the remaining 3 belong to STA. having a 70% of the market.. isnt really that great either to me. thats only 7 out of 10 in numbers.

5) COE are increasing if i am not wrong, (im still a student and dont drive a car) and oil prices, ERP, road tax, and perhaps other reason will causes less people to have the ability to own a car.

5.5) the good thing i can think of about the rising COE cost is that people will own the car longer than compare to last time, rather then changing them once every 2-3 years. that means more cars are needed to be inspect when they reach their 3rd, 5th, 7th, 9th year.

6) If i am not wrong.. from what i feel and heard, singaopre government is building up more and more Public transport thing. perhaps it will be even harder and more expensive to own a car next time..

overall i still have many concern about the growth of Vicom because of the current situation in singapore.
The biggest drawback for me on VICOM is the SETCO part.. i totally dun understand it =.= and SETCO is the bigger pie of revenue into VICOM.

[dydx]

The main driver for Vicom's 2 core businesses - vehicles inspection; and other inspection/certification services under subsidiary SETSCO - is primarily based on government regulations and controls on public safety, product safety, environmental protection, technical specifications in certain commercial/industrial activities, etc. Historically, all these have incresaed over time, and will continue to increase if we believe the Singapore government is a responsible one and will continue to exert more control on certain activities and other aspects in our economy. In an urbanized environment like ours in Singapore, and as more complex products/technologies and activities emerge in Singapore over time, there should be more such government regulations and controls being introduced. This explains why Vicom's overall business volume, revenue and profits continue to grow yearly, and why Vicom has proven to be a great investment for its loyal shareholders and early investors.

Of course, as an additional bonus, we should not forget Vicom with its 7 vehicle inspection centres also owns quite a lot of valuable industrial land/space which has been deriving good rentals and is undervalued in its B/S.

[FFNow]

jianjian, I think from third yr onwards, cars need to go for inspection every yr (http://www.vicom.com.sg/inspectionprice.htm)

dydx, since SETSCO is bringing in most of the revenues and through some googling and research from SINGLAS website, CAAS and FAA website, they have lots of competition in the testing and inspection industry. Will the revenue for SETSCO still increase consistently like it has been doing in the past?

[yeokiwi]

5) COE are increasing if i am not wrong, (im still a student and dont drive a car) and oil prices, ERP, road tax, and perhaps other reason will causes less people to have the ability to own a car.

6) If i am not wrong.. from what i feel and heard, singaopre government is building up more and more Public transport thing. perhaps it will be even harder and more expensive to own a car next time..

I don't think the car population will drop unless the government stops the issuing of COEs.
Whenever the COEs drop below $10k, you will see many Singaporeans rush to car showrooms to plonk down their money for a car.

VICOM future cashflow is basically assured due to its monopoly in car inspection and the price of inspection is not regulated(unlike bus fares) and can be adjusted anytime.

Future growth in VICOM? I don't bet on that though. But as dydx had written, VICOM has many large pieces of industrial land(they are huge!) that may be undervalued. Currently, I observed that the land is relatively unused.

[FFNow]

Ok. Let's see how the 3Q results pan out. They will be released on 10th Nov.

[Musicwhiz]

So from what I gather from this thread thus far, VICOM's growth prospects may be rather muted as the vehicle population in Singapore is being more tightly controlled since the supply of COEs had shrunk. While it is true that existing cars and taxis still need to undergo mandatory inspection and testing, this would indicate VICOM is more of a cash cow.

With respect to the land which VICOM holds (and which some forumers say is under-valued in the Balance Sheet), how likely is it for the Company to be able to unlock its value? If possible, this would make VICOM a good asset play, along with steady and consistent dividends.

What remains now is the valuation one should be willing to pay for a slice of this lucrative business.

Note: I am NOT vested.

[dydx]

This rock-solid business has again delivered solid results in Q3-FY10.....
http://info.sgx.com/webcoranncatth.nsf/V...7002FF250/$file/VICOM_3Q2010.pdf?openelement

As at 30Sep10, the cash reserve has reached yet another new record of $48.8m - equivalent to $0.565/share, based on the 86.35m outstanding issued shares. Again, I am hoping for a BIG Final dividend (last FY09: $0.06/share).