Friday, September 1, 2017

Recent Action - Vicom

I initiated back a new position in Vicom a few days ago at $5.67 for 6,600 shares.

I used to own this position in the past and divested this early last year when there are better opportunities. You can search the blog on the past Vicom articles I wrote.

This is not a huge position and am struggling to get more shares as liquidity is scarce.

After my divestment with Guocoland, my cash position increased quite considerably and I wanted to allocate some of those into dividend counters.

Vicom caught my attention after their latest quarterly results announcement especially with the dividend policy moved from 50% to 90%. Now, on first glance, it doesn't look like they are increasing it that much after all. Last year, payout was already at 83.3% and the previous year it was at 80.4%. So bringing it up to 90% doesn't seem a huge increase.


However, I believe the signal from the board is clear. Making the policy to go for a 90% payout signals that the company will not have much growth to maneuver and will pay most of their earnings out to shareholders. Parents Comfortdelgro owns 67% of Vicom, so that's probably there's a bit of engineering over there.

At current price, that represents a 4.6% yield to an investor. That's unlevered yield, so it's unlike any of the Reits you see out there.

Vicom is known for its equity bond nature but businesses are down and outlook for Setsco doesn't seem to bounce back anytime soon either.

The big catalyst I am eyeing is that $100m cash they have on their balance sheet. If parents Comfortdelgro mandates, they might just give out a one-time huge dividend payout in the next 1 or 2 years. That'll be the real teaser. All things else, I'll just wait for the 4.6% yield while waiting out for that thesis to play out.



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10 comments:

  1. Congrats on your divestment in Guocoland. I was quite surprise that you sold given the still attractive discount to NAV as well as the impending 7 cents dividend. May I ask at what price did you let go and the reason?

    MC

    ReplyDelete
    Replies
    1. Hi MC

      Thank you, I have a TP which is around $2.30 which I'd like to take profit and move on. So I did when it hits $2.30 just before the results announcement. On paper, the real value of those properties in Guocoland is much higher but we never know with market sentiment. Plus, I've previously mentioned about how HK developers peers tend to trade at a discount for a very long time. So the risk reward tilt is the right time for me.

      Delete
  2. This comment has been removed by the author.

    ReplyDelete
  3. B,

    what does it mean, "That's unlevered yield"?

    ReplyDelete
  4. I guess Its means unlike Reits where there are highly leveraged with debt to generate the earnings.

    Vicom has 0 debt, so its yield are not leveraged.

    ReplyDelete
  5. Hi B. i sum the 3 payout this year. Appears to be 5.4% yield instead of 4.6%.
    Am i missing out something ?

    Cory

    ReplyDelete
    Replies
    1. Hi Cory

      There should only be 2 payment, one interim one final.

      This year interim they raise the payout to 90% so final the absolute should decrease.

      Delete
    2. I was looking at the 3 separate lines in SGX for year 2017 :)

      VICOM LTD DIVIDEND 14 Aug 2017 16 Aug 2017 23 Aug 2017 SGD 0.1312 ONE-TIER TAX
      VICOM LTD DIVIDEND 28 Apr 2017 03 May 2017 11 May 2017 SGD 0.1 ONE-TIER TAX
      VICOM LTD DIVIDEND 28 Apr 2017 03 May 2017 11 May 2017 SGD 0.085 ONE-TIER TAX

      Delete
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