VICOM

[FFNow]

VICOM shows clearly that if one chooses a fundamentally strong business to invest in, it's hard to be wrong provided one enters with a margin of safety. That is why value investing rocks!

[palantir]

VICOM has always been on my radar screen since $3.50. But I have never taken the plunge as the price has not been attractive, IMO. Guess I miss the boat.

Same for me. VICOM is in my watch list, but the price is never right since day 1

Me still banging head now for not buying more when the price was $2 then. Coz I think VICOM is rather illiquid. A few lots traded daily only

[snowcap]

Same here. Watching it since $3. And told myself "wait for price to come down, then I'll have margin of safety". I'm still waiting...

[palantir]

Boat sails already..... Don't think very be back anytime soon..... Sigh

[artreal]

Hi Shanrui,

Thanks for sharing.
Am looking at note 21, the segment information of their AR 2011.
In the 3rd section, the other related business has a good profit of 8.7 mil.
Among this amount, according to the history in AR 2007~2009, roughtly 5~6mil comes from the rental income (shame that they don't report it anymore).
My question is on the validity of this profit...

From AR 2007~2009, the majority of rental revenue came from the inter-segment rental. I assume inter-segment revenue is suppose to be consolidated and knocked off with rental expense in the other two segments.
Only the external rental part should generate profit -- revenue of 2010 is about 1.8 mil.
Apparently, however, Vicom reports the inter-segment rental as part of the profit, 5 mil in its 28 mil net earning.
And this habit is there for long in all downloadable annual reports...

I found it very hard to understand...

This will be great for VICOM if it really becomes an industry-wide practice

新法令明天生效 零售业者接“柠檬”手法各异

（2012-08-31）

新加坡车业公会会长梁添丁受访时说：“很多二手车商目前是靠多年的修车经验来辨识汽车哪里有问题，有些是能靠经验或肉眼辨识，有些则需要仪器才能检验出来。我们鼓励会员把二手车送交维康或STA检验，以防万一，顾客买的时候也比较放心。”

据了解，目前汽车检验费是168元，若每辆二手车都送去检验，商家成本相信会加重。维康汽车检验中心已表示会给予新加坡车业公会会员10%的折扣。

http://www.zaobao.com.sg/sp/sp120831_011.shtml

(vested)

[shanrui_91]

Hi Shanrui,

Thanks for sharing.
Am looking at note 21, the segment information of their AR 2011.
In the 3rd section, the other related business has a good profit of 8.7 mil.
Among this amount, according to the history in AR 2007~2009, roughtly 5~6mil comes from the rental income (shame that they don't report it anymore).
My question is on the validity of this profit...

From AR 2007~2009, the majority of rental revenue came from the inter-segment rental. I assume inter-segment revenue is suppose to be consolidated and knocked off with rental expense in the other two segments.
Only the external rental part should generate profit -- revenue of 2010 is about 1.8 mil.
Apparently, however, Vicom reports the inter-segment rental as part of the profit, 5 mil in its 28 mil net earning.
And this habit is there for long in all downloadable annual reports...

I found it very hard to understand...

In the previous financial year, the company combine all other non-core business together under the Other Related Business. Rental Income and Vehicle Assessment was roped in under. If you compare the 2010 Annual Report with the 2010 figure in 2011, you will have noticed that the figures are the same. In fact, for 2011 Q3 they still show the breakdown.

http://info.sgx.com/webcoranncatth.nsf/V...40027F192/$file/VICOM_3Q2011.pdf?openelement

As for the accounting of profit for segment, rental income from inter-segment are accounting under rental income. These rental income from internal segment will then be charged under rental expense for the respective segment that incurred it.

This should only applies for the segmental revenue and should not be seen in the actual income sheet as consolidation will have eliminated the amount.

[artreal]

Ahh... ok, thank you Shanrui.

But this seems to be so complicated -- Vicom's two segments pay rental itself on the other segment.

And the third segment doesn't even have the asset to support the rental business -- asset is very light, looks as if the premise has been moved to the former two segments in year 2010.

Am I right to say that the management has created this rental business to park some revenue from the the other two segments?

But I agree, as you said, after consolidation, all these doesn't matter...

Hi Shanrui,

Thanks for sharing.
Am looking at note 21, the segment information of their AR 2011.
In the 3rd section, the other related business has a good profit of 8.7 mil.
Among this amount, according to the history in AR 2007~2009, roughtly 5~6mil comes from the rental income (shame that they don't report it anymore).
My question is on the validity of this profit...

From AR 2007~2009, the majority of rental revenue came from the inter-segment rental. I assume inter-segment revenue is suppose to be consolidated and knocked off with rental expense in the other two segments.
Only the external rental part should generate profit -- revenue of 2010 is about 1.8 mil.
Apparently, however, Vicom reports the inter-segment rental as part of the profit, 5 mil in its 28 mil net earning.
And this habit is there for long in all downloadable annual reports...

I found it very hard to understand...

In the previous financial year, the company combine all other non-core business together under the Other Related Business. Rental Income and Vehicle Assessment was roped in under. If you compare the 2010 Annual Report with the 2010 figure in 2011, you will have noticed that the figures are the same. In fact, for 2011 Q3 they still show the breakdown.

http://info.sgx.com/webcoranncatth.nsf/V...40027F192/$file/VICOM_3Q2011.pdf?openelement

As for the accounting of profit for segment, rental income from inter-segment are accounting under rental income. These rental income from internal segment will then be charged under rental expense for the respective segment that incurred it.

This should only applies for the segmental revenue and should not be seen in the actual income sheet as consolidation will have eliminated the amount.

[CityFarmer]

Ahh... ok, thank you Shanrui.

But this seems to be so complicated -- Vicom's two segments pay rental itself on the other segment.

And the third segment doesn't even have the asset to support the rental business -- asset is very light, looks as if the premise has been moved to the former two segments in year 2010.

Am I right to say that the management has created this rental business to park some revenue from the the other two segments?

But I agree, as you said, after consolidation, all these doesn't matter...

Accounted the rental across segment is "norm" in FR. I do not see any complication. It should be shown in segmented report for clarity, but not sure it is mandatory in FRS accounting rules.

[Musicwhiz]

Note that VICOM will be releasing 3Q 2012 results tomorrow evening Nov 8, 2012, after market close.

[Musicwhiz]

VICOM has just released their 3Q 2012 results today. Key highlights as follows:-

1) 3Q 2012 revenue was up 6.7% to $24.4m, up from $22.9m. For 9M 2012, the increase in revenue was 7.5% to $72.7m.

2) Operating profit for 3Q 2012 was $7.75m, up 4.4% year on year, due to higher depreciation expenses on their new Teban Gardens building. Operating margin for 3Q 2012 was 31.8%, while op margin for 9M 2012 was 33%.

3) NPAT was 2.5% higher at $6.4m mainly due to higher taxation (up +16.1%). NPAT margin stood at 26.2%.

4) ROE for 9M 2012 (annualised) was 23.95%, and this is an unlevered ROE (same as ROIC in this case) as the Balance Sheet has zero debt.

5) 3Q 2012 OCF was $10.98m while capex was $1.3m, yielding FCF of $9.68m. 9M 2012 saw FCF generation of $18.7m in total. Note that payment of last year's final dividend + this year's interim dividend (consisting of 10.7c final + special and 7.5c interim) amounted to $16.05m. Last year (2011) full year FCF generation was $18.2m, and this was due to higher capex due to the construction of the new premises at Teban Gardens. 9M 2012 FCF already exceeds the FCF for the whole of 2011, therefore there is a high chance of a higher final dividend compared to last year's final dividend of 7.5c/share. If FCF continues to be strong, a dividend of perhaps 8c/share may likely be declared.

6) With latest small car COE prices hitting a record $77,201 for 2012, it is likely that more cars will remain on the roads and this will benefit VICOM's vehicle inspection division. The Company is also expecting demand for test and inspection services to be sustained despite keen competition.

(Vested)