Valuable Vicom
Long time ago, I mentioned about Vicom being a prime candidate for value at around $1.50, fully unaware that it will hit around $1.50 so soon this year. At the lowest, Vicom was trading at around $1.30 near end of Oct 2008. They just announced their 3Q results today.
Here are the main ratios for Vicom over the last 9 months:
--------------------------9M08------------9M07
Gross margins--------28.8%-----------29.3%
Net margins-----------23.0%-----------23.4%
ROE (annualized)-----25.6%-----------25.1%
Current ratio------------1.57-------------1.35
Total debt/equity-------34.5%----------30.4%
NAV for FY07 is $0.70, for 9M08 is $0.7532. This means that it’s trading at around 2x NAV at current price of $1.53 at last closing.
For the past 9 months in the FY08, Vicom earns a PATMI per share of 14.89 cts per share. In a non linear world, let’s just take a linear assumption that everything can be projected in a straight line to 4Q08 – that gives us a PATMI per share of 19.8 cts per share. Last closing price for Vicom is at $1.53 on 11th Nov, giving us a PE of 7.7x. Historical PE might not mean much in these extraordinary times, but I feel we have to put the 7.7x PE in perspective. Past PE of Vicom range from 6.8 times to 7.3 times from FY2004 to FY2007.
I did a valuation for Vicom before. It ranges from $2.2 to $2.8 over a period of 10 years. At 1.53, it gives us a paltry CAGR of 3.7% to 6.2%. But as I think the real attraction lies in the dividend. FY2007’s dividend is around 15.5 cts per share. Assuming no change in dividends over the next ten years, and without growth in dividends, we’ll get back $1.55 in ten years time, just based on dividends alone. This means a 0% growth in dividends over the next 10 years. Historical CAGR of dividends growth is 50%, with FY06 to FY07 increase in dividends per share (special dividends included) of 29 %.
You might want to check this out:
Per share data:
-----------Div without specials---------Div with specials
FY04----------4.6 cts-------------------------4.6 cts
FY05----------5.2 cts-------------------------6.8 cts
FY06-----------7.9 cts------------------------12.0 cts
FY07----------15.5 cts------------------------15.5 cts
15.5 cts per share at $1.53 means a dividend yield of 10.1% - a good rate anytime.
Business wise, their segmented breakdown of business as a % of revenue are as follows in 9M08:
Vehicle inspection business – 30.6%
Vehicle assessment business – 3.6%
Test / inspection services – 59.2%
This segmented breakdown of their business to their revenue is more or less the same as their FY07 results. Their main business is still the test / inspection service which makes up nearly 60% of their total revenue, which shows an increasing trend over the years. Vehicle assessment business will continue to drop as their monopoly status on this business is removed by regulation. Test/inspection services in SETSCO will thus continue to be their growth engine, followed by their vehicle inspection business.
Verdict:
Seems like quite a nice combination of factors that make Vicom attractive to me again. I like the high dividend yield of 10% - even if it cuts the dividend to FY06 level, it’ll be around 7-8%, which is pretty decent to me. What is more attractive to me is that this company got pretty good cash flow, decent margins, low debts and boring business – quite a cash cow in my opinion. If they only hold on to FY07’s dividend and continue paying at the same rate without any growth over the next ten years, I would have gotten the cost of the share for free – I thought that the downside is pretty much covered. And we haven’t talk about the likely capital gains. Or the likely growth in dividends given. If the wind is behind the sails of Vicom, we might be even getting back our cost of the shares much earlier than 10 years.
There might be some issues at buying or selling the shares. As the float is quite low, there is always a wide spread in the bid/sell queue. I think this is like singpost kind of company.
Is this the best use of my cash?
Stumble it!
Here are the main ratios for Vicom over the last 9 months:
--------------------------9M08------------9M07
Gross margins--------28.8%-----------29.3%
Net margins-----------23.0%-----------23.4%
ROE (annualized)-----25.6%-----------25.1%
Current ratio------------1.57-------------1.35
Total debt/equity-------34.5%----------30.4%
NAV for FY07 is $0.70, for 9M08 is $0.7532. This means that it’s trading at around 2x NAV at current price of $1.53 at last closing.
For the past 9 months in the FY08, Vicom earns a PATMI per share of 14.89 cts per share. In a non linear world, let’s just take a linear assumption that everything can be projected in a straight line to 4Q08 – that gives us a PATMI per share of 19.8 cts per share. Last closing price for Vicom is at $1.53 on 11th Nov, giving us a PE of 7.7x. Historical PE might not mean much in these extraordinary times, but I feel we have to put the 7.7x PE in perspective. Past PE of Vicom range from 6.8 times to 7.3 times from FY2004 to FY2007.
I did a valuation for Vicom before. It ranges from $2.2 to $2.8 over a period of 10 years. At 1.53, it gives us a paltry CAGR of 3.7% to 6.2%. But as I think the real attraction lies in the dividend. FY2007’s dividend is around 15.5 cts per share. Assuming no change in dividends over the next ten years, and without growth in dividends, we’ll get back $1.55 in ten years time, just based on dividends alone. This means a 0% growth in dividends over the next 10 years. Historical CAGR of dividends growth is 50%, with FY06 to FY07 increase in dividends per share (special dividends included) of 29 %.
You might want to check this out:
Per share data:
-----------Div without specials---------Div with specials
FY04----------4.6 cts-------------------------4.6 cts
FY05----------5.2 cts-------------------------6.8 cts
FY06-----------7.9 cts------------------------12.0 cts
FY07----------15.5 cts------------------------15.5 cts
15.5 cts per share at $1.53 means a dividend yield of 10.1% - a good rate anytime.
Business wise, their segmented breakdown of business as a % of revenue are as follows in 9M08:
Vehicle inspection business – 30.6%
Vehicle assessment business – 3.6%
Test / inspection services – 59.2%
This segmented breakdown of their business to their revenue is more or less the same as their FY07 results. Their main business is still the test / inspection service which makes up nearly 60% of their total revenue, which shows an increasing trend over the years. Vehicle assessment business will continue to drop as their monopoly status on this business is removed by regulation. Test/inspection services in SETSCO will thus continue to be their growth engine, followed by their vehicle inspection business.
Verdict:
Seems like quite a nice combination of factors that make Vicom attractive to me again. I like the high dividend yield of 10% - even if it cuts the dividend to FY06 level, it’ll be around 7-8%, which is pretty decent to me. What is more attractive to me is that this company got pretty good cash flow, decent margins, low debts and boring business – quite a cash cow in my opinion. If they only hold on to FY07’s dividend and continue paying at the same rate without any growth over the next ten years, I would have gotten the cost of the share for free – I thought that the downside is pretty much covered. And we haven’t talk about the likely capital gains. Or the likely growth in dividends given. If the wind is behind the sails of Vicom, we might be even getting back our cost of the shares much earlier than 10 years.
There might be some issues at buying or selling the shares. As the float is quite low, there is always a wide spread in the bid/sell queue. I think this is like singpost kind of company.
Is this the best use of my cash?
Stumble it!