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Thursday, February 4, 2016

Vicom FY15 - Steady Dividends Growth Play

This would be my last coverage for the company since I have divested in the company recently and thought I'd just finish the full year as part of the series. I'll still be keeping a close look on the development of the company but unless I decide to get vested again, I won't probably be reporting on their results.




You won't see much surprises coming in from the company. I think over the years it has been pretty one way direction on where the earnings are going but with the recent slow growth for their vehicle segment and slowdown in the setsco segment, it may be worth to take a look if the trend for the future would reverse back. From the very least, that's what I decide to do when I divest the company recently and looking at where the other opportunities are.

I highlighted in the previous quarter 3 results (link here) that there are slowing signs that the company is facing. This isn't purely just this company alone but across all other sectors many are facing difficulties as well.

FY revenue came up to $106m, a small 1.3% decline as compared to the previous year. The good news is, as I had highlighted in my previous post, they are able to reduce their staff costs correspondingly by a similar amount. I think this is something that many companies would envy and are struggling to do because for most of the times, it isn't that easy to reduce your workforce or reduce their pay. Net profit attributable to shareholders edged up 4.2% at the end of FY15.




If you look at their balance sheet, they continue to grow stronger with cash burst through the $100m mark now and almost 57% of their overall asset value. Capex remains within the range and FCF continues to be strong at around $32M.

They continue to pay out good dividends growth over the years and this year was no exception, despite the topline slowdown. Dividends has increased to 28.5 cents, up from 27 cents the previous year. Based on current price, they provide a nice 4.9% yield to investors.






Final Thoughts

It'll be nice to have this as a pure yield play now giving you 4.9% return every year.

However, with some of the other opportunities out there, I feel there may be a better risk reward elsewhere since there are other stocks which has come back down to earth.

The other thing to note is also on their topline slowdown, evidently from the slower 0.25% yearly growth as set out by LTA and also how their non-vehicle segment are playing the weaker economy out.

*not vested as of writing but may look to be vested again someday, at the right price



2 comments:

  1. Thanks for this post. I think this may be the "limit" in terms of absolute dividend appreciation. I bought VICOM in August 2011 and it has given be a very steady and consistent yield thus far. With the vehicle population set to shrink or remain stable, and with the non-vehicle inspection division seeing a slowdown due to the "pertinent" industries, I feel we may see FCF decline below the $30m mark, which means dividends will either be kept constant (with the help of the $100m cash balance) or cut.

    Regards.

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    Replies
    1. Thanks MW.

      Even as the FCF are declining a bit, I trust that they will be prudent with giving out their dividends to ensure that they don't give out anything more than they could. I guess that's the best thing about this counter. Ever strong FCF.

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