VICOM

[lester]

Demand can change very quickly, you can want a car but if you lost your job or cannot afford it, you will not buy it. car is no longer a need in that situation anymore. You just need a shock event to happen (many lost their jobs, stock market crashed etc) and demand will be gone even thought supply can remain the same.

Never be complacent and history always repeat.

I do have to agree with the fact that Vicom's business could be affected by the ups and downs of the economy and the efficiency of the local public transport network. True enough, during recession, people may opt to sell their car due to their economic conditions and travel on public transport.

However, there will also be a pool of car buyers that may put off buying new cars to replace their old cars; which means continual inspection business for the company.

On the other hand, I wouldn't be too worried about the ups and downs of the economy and COE pricing even though I still feel that COE prices would not tumble too much. Although it is good to keep track of COE pricing and how the management is responding to it, I think we do not need to be overly concerned about it. Looking at the past financial crisis in 2008, Vicom still manage to increase its net income when other business are losing money or closing down. This also happen on the back of one of the lowest COE pricing in 2008 and 2009 for cat A and cat B vehicles.

Warren Buffett always said he has not been too particular about when is the next recession, but rather, he focuses more on the management abilities. On that note, I think that Vicom management has shown itself to be doing well to increase its bottom line year on year.

Hi Lester

Fair to say that your analysis is sound... No offence but would any of your statements 1-3 change (and some may argue 4) if you wrote this back in 2004?

I'm trying to use this example to also demonstrate that fundamental analysis has to also be time sensitive and "what's changed" driven. When I read a research report on undervalued stock... I tend to ask: any difference if the report is dated 5 years ago?

Hi Specuvestor, no offence taken. This forum is all about discussing each other views and learning through them. But would you care to elaborate more on your views? What was the reason that cause COE prices to drop in 2005? Good to brush up my knowledge on COE.

(vested)

[specuvestor]

Hi Lester

Fair to say that your analysis is sound... No offence but would any of your statements 1-3 change (and some may argue 4) if you wrote this back in 2004?

I'm trying to use this example to also demonstrate that fundamental analysis has to also be time sensitive and "what's changed" driven. When I read a research report on undervalued stock... I tend to ask: any difference if the report is dated 5 years ago?

Probably little has changed from what was written if they were written in 2004…BUT…the price of VICOM has changed dramatically. So, while the ability to perform FA is important, the ability to see things (catalysts) before others is even more important. Many successful business men/women are successful because they have better foresight than others and move ahead of the pack.

Hi Lester

Fair to say that your analysis is sound... No offence but would any of your statements 1-3 change (and some may argue 4) if you wrote this back in 2004?

I'm trying to use this example to also demonstrate that fundamental analysis has to also be time sensitive and "what's changed" driven. When I read a research report on undervalued stock... I tend to ask: any difference if the report is dated 5 years ago?

Hi Specuvestor, no offence taken. This forum is all about discussing each other views and learning through them. But would you care to elaborate more on your views? What was the reason that cause COE prices to drop in 2005? Good to brush up my knowledge on COE.

(vested)

Yes Ben... the share price changed... so what was the catalyst? My point is that the fundamental reasoning of Lester has not changed in past 10 years... but something changed to propel Vicom share price. Fundamentals must always be the basis, but we need to understand the drivers and catalysts as well.

As many forumers pointed out, COE prices which affects scrapping has a big impact on Vicom. In addition abnormally low interest rates for past 10 years has been supporting dividend and cashcow stocks. These are the exogenous events besides the macro consideration that Lester talked about/ observed which remains more or less the same past 10 years

On a company specific basis revenue more than doubled and earnings tripled in past 10 years while dividends tripled. These are the things that changed past 10 years.

I'm using this as an example of being too general in analysis and failing to understand the specific catalysts. Just like many who think correctly that smartphones are booming could either buy Apple or Nokia/Moto/BB... drivers are totally different from big picture analysis. IMHO this problem is the main issue for many deep value investment analysis.

PS Lester IIRC there was a huge supply of COE because PM Lee wanted to fulfill the middle class dream of owning a car. Recently we learnt that LTA made a "miscalculation" on the growth of COE vs scrapping... ie their official reason. As usual problems from policy issues do not develop overnight... they have a lag time for gestation.

[Shrivathsa]

However, the government seems to be moderating the COE supply to ensure there is no boom and bust, if that happens, will it not smoothen out Vicoms earnings, making for a more smooth growth rate, which could in itself act as a catalyst?

[opmi]

Just a straw poll: how many people u know did not get a replacement car after their old car was scrapped recently?

For me, I know 2 of them.

[Temperament]

Will not get replacement car more then 90% . DTL station just walk downstairs to anywhere in (1916/7)Singapore. Not worth it for retiree IMO.

[Ben]

Will not get replacement car more then 90% . DTL station just walk downstairs to anywhere in (1916/7)Singapore. Not worth it for retiree IMO.

Do you mean 2016/17?

I know of one friend who switch to public transport recently.

[Caelitus]

Just a straw poll: how many people u know did not get a replacement car after their old car was scrapped recently?

For me, I know 2 of them.

I scrapped my car to switch to public transport. I know of 2 more who elected to do so permanently. however, there are others who are awaiting an opportune time to change cars. This group is bigger (6 pax in my circle). As for aspiring 1st time owners, there are many of them in my organisation. Vicom's business has a likely strong support base.

[Porkbelly]

Unless the cost of maintaining a car is offset by high income or benefit from employment, there is no need for a car in Singapore.

I know of people who in their entire adult lives have never taken buses or trains. They have always owned cars, and they will continue to do so.

But explore further and you notice that they do not go for vacations very much ( except maybe to drive to Malaysia.) There is not enough money... all gone into the car, mortage, maid, pets.

The attraction of owning wheels in Singapore is very strong.. it exhibits "I have arrived". And once you own a car, its a viscious cycle to own yet another.. continuing to pay the banks, insurers, LTA, oil companies a constant stream of cash.

Proper planning of time, finance will set you free from the burden of owning an iron horse... which will cough and whine after the 3rd year.

VICOM is a great investment for a long, long time.

[pianist]

just know my hdb neighbor next door bought 2 cars at one go two years ago. One Mercedes one volkwagon, . They are worth at least usd 70m then

[thor666]

One of my friends is scrapping his car this week. The other is looking to get a second hand car after the current Coe expires.

Agree with porkbelly, vicom is a great investment.


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