VICOM

[valuehunter]

In the latest results by parent Comfort Delgro, revenue for Vehicle Inspection and the Test and Inspection Business is expected to improve. Given the healthy margins and past track record, is it not reasonable to expect better profits in the coming quarters? Something to mull over..... not an inducement to buy or sell the shares.

[dydx]

Despite the lukewarm comments and doubts on Vicom's future growth potential by some, the share price has continued to march on and closed at $3.10 today.

Quite clearly, there are many others who see the merits and value, and are prepared to buy into Vicom at the current historical record share price level, for the coming dividend, and the expected further steady growth of the 2 core businesses and their profits.

[Polaris]

I'm not sure why they have not revealed why the sudden increase in capex compared to all the previous years.

Let me try to answer one of your question:
You will notice that FY08 & FY09 dividends were signficantly lower. During AGMs, the reasons cited was they are keeping the cash for Setco expansion - a new building at its Teban Crescent site. However due to the construction boom - the 2 casinos and 2 crackers, construction cost went up tremendously so the construction was postponed. The project was started again in 2010 when the construction cost dropped significantly. I'm guessing the Capex is partly due to the new plant.

In addition, Setsco also invested in a JV in Abu Dhabi for a Setsco Middle East Laboratory (Setsco owned 49%) with paid-up capital of US$1m. If I remember correctly, this is its first overseas foray after Malaysia.

I believe both the above were in the SGX announcements.

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I'm not sure about the venturing overseas part but I would be glad if Vicom looked into it. There might be growth there for the company in this aspect.

Setsco has overseas business in Malaysia and recently invested in a JV Lab in Abu Dhabi. Setsco has a good brandname - so should continue to see overseas opportunity.

As for Vicom vehicle inspection business, it is focussed on Singapore business. Previously there were two JV overseas investment in China but Vicom was only involved in consultancy, and eventually the vehicle inspection businesses in China were put under Comfort Delgro (Vicom's parent company).

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1. Setsco is the division growing its revenue. However, based on FY2010 AR, its Ops Profit of $9830k is about the same as the Vehicle Inspection's $9544k.
2. Unclear if Vicom still has 70% of market, and i could not see how the original 70% was derived. StarAuto also claims to be a leader. So it could be an issue of definition. I could claim to have 90% share for vehicle inspection in my home.
3. Some competitors in Setsco's areas appear to be SGS and STS (a unit of ST Kinectics). These would be formidable competitors. Could Vicom buy over STS just like it did Setsco? Doubt it because STS probably much more bigger, with better expertise.
4. However as pointed out, testing could be a growing market. Does it have expertise or a moat? Is Setsco pushing its business aggressively? Based on its website, there's not heavy marketing ambition. Can't see how it would have very special expertise beyond maybe a few individuals. Of course this could change later. Would also accept that this is just a personal, single facet assessment from its website.

That's not to say Vicom may not be a good investment.

My 2 cents on an unfamiliar business after reading the interest from forummers. Please feel free to re-butt.

Setsco is competing with both local and global testing and certification companies. Hence, its margin should be benchmarked with other testing and certification companies, and not Vicom. Despite such competition, the fact is it is able to continually achieve both top- and bottom-line growth. That speaks for itself whether it has competitive advantage vs competitors. True value company don't have to trumpet their marketing ambitions. They just quietly deliver excellent value to their customer from their simple and understated office.

Based on last year Annual Report, Vicom's market share is still > 70%. I don't have the figure here. You can google the no. of vehicle inspected by Vicom. Then from LTA website, obtain the total no. of vehicle inspected in Singapore. Then, do a simple division.

[FFNow]

polaris, guess I have overlooked the Setsco expansion at Teban Crescent site hence the increased capex. I read about the JV in Abu Dhabi though.

[Polaris]

The share price of Vicom has been pretty resilence in the face of the Japan Tsunami and Nuclear threat. Look forward to attending its AGM.

[natnavi]

The share price of Vicom has been pretty resilence in the face of the Japan Tsunami and Nuclear threat. Look forward to attending its AGM.

I was hoping the prices will drop more so that I can invest more in the company. I never see the point of share prices going up and up. When the prices go up, the chances for buying more reduces. It is only worth going up if you are intending to sell them off. But then again, why would you want to sell off a perfectly good company? Go long is my advice.

[dydx]

The share price of Vicom has been pretty resilence in the face of the Japan Tsunami and Nuclear threat.

This simply confirms that most shareholders are (1) steadfast in their belief that Vicom is a good business/investment with further growth potential; (2) financially well funded; and (3) prepared to hold on to their Vicom shares - i.e. the longer-term, serious investor type.

[juno.tay]

I think VICOM is a really interesting company. Will be doing Fundamental Analysis report soon.

What I really liked about it was little debt, high returns on capital, and a fairly good growth rate and little capital expenditure. Coupled with its current market valuation - it looks to be quite attractive.

What more could a value investor ask for?

[juno.tay]

Hi guys, I just posted a fundamental analysis report on VICOM.

I must say I am really surprised at the results. VICOM has been growing extremely well over the past few years with little debt.

VICOM Fundamental Analysis Report

I suspect it will do pretty well in the years to come

[FFNow]

Yes Vicom has been generating great FCF over the years with no debt and high ROE and margins.