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Wednesday, November 11, 2015

Vicom Q3 FY15 - Brink of Slowdown?

I am running through the Vicom quarterly results as part of my usual keeping up routine with the company.
 
You can view the past quarterly results I have covered here.
 
 
 
 
 
Vicom results have been pretty much straightforward in the past couple of years. However, there has been a couple of recent growth stocks who have gone down the path of downhill - Super Group, Sarine and Osim have all suffered similar fate recently. Will Vicom be following their footsteps?
 
Topline growth has finally dropped year on year and if I remember correctly, this has been the longest time ever the company has reported negative growth on their topline. The management did reiterated and gave a guidance that their non-vehicle segment would slow down so this shouldn't come as a surprise. Still, it's interesting to see how investors would react to this. It's pretty evident slowdown there at 6% negative growth.
 
Fortunately, the company is able to mitigate their bottomline by reducing their operating costs correspondingly to counter their topline slowdown. The most obvious reduction was in the salary related costs where the company is able to reduce by 8.1% year on year. A friend of mine who has friends working in the company told me that the staff were getting 5 months variable bonus during good time. If the source is true, I think it's good that the management did pare that down in the midst of global slowdown. I think that's prudent management set up there.
 
Net Profit managed to creep up slightly 3% year on year and this should be maintained in the last quarter as well I predict.




I changed my full year EPS estimate to come almost flat at 35 cents for FY2015. Dividend should remain same as previous year at 27 cents, giving investors a 4.4% yield at $6.05. Payout would also be similar at around 77%.



Final Thoughts

The problem with valuing this kind of company is people tend to value them using discounted cash flow because it is the most common method given their cashflow predictable nature. When topline growth stalls, we assume that cashflow growth stalls as well and this can have an impact to their intrinsic value as part of the valuation exercise.
 
The company isn't exactly cheap at this price at a forward PER of 17.3x and with global storm coming fast and fury now, we wonder if it's finally the end of the journey for this long term darling company.


*Vested with 6,000 shares as of writing.

5 comments:

  1. I will stay vested in VICOM. Over the long run, I am confident that the number of vehicles on Singapore's road will continue to rise.

    ReplyDelete
    Replies
    1. Hi Dividend Knight

      I am not so sure about that. But i think there's an over emphasization on vehicle segment whenever investors talk about Vicom. For me, I have never been too worried about their vehicle segment since I start invested in Vicom. I believe it is the non-vehicle segment that are the true dark horse that will make or break for the company. The traditional vehicle should do just really fine imo.

      Delete
  2. Hi B,

    Darling also go thru rough patches, but roads ahead shld be smoothened!

    btw, Why r u repeating what I told my friends abt it's not exactly cheap n global storm ahead few mths ago?

    ReplyDelete
    Replies
    1. Hi Rolf

      Can you enlightened why the roads ahead should be smoothened?

      I am amateur, so I need to repeat what cnbc is always telling me :)

      Delete

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