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Steady Growth at Vicom In 2013

Commercial inspection and testing firm Vicom (SGX: V01) released its full year results yesterday evening and reported high single-digit growth rates for both its top and bottom-lines.

The company, two-thirds of which is owned by land transport outfit ComfortDelGro Corporation (SGX: C52), operates vehicle inspection centres in Singapore in addition to providing other testing and inspection services under its SETSCO subsidiary.

In Vicom’s website, SETSCO is described as providing “testing, calibration, inspection, consultancy and training services to the aerospace, marine and offshore, biotechnology, oil and petrochemical, building construction and electronics manufacturing industries. Its services include quality assurance testing and evaluation of building materials, structural and chemical analysis, food and microbiological analysis, environmental monitoring, amongst others.”

Some basic numbers

For the 12 months ended 31 Dec 2013, Vicom’s revenue grew by 8.1% year-on-year to S$105m while profits were 7.7% higher at S$28.4m. The company cited “higher business volume” as a reason for the top-line growth but saw overall expenses growing at a slightly faster pace than revenue to support that increase in business.

The company’s annual cash flows from its business operations increased by 6% year-on-year to S$32.5m from S$30.7m. With capital expenditures of just S$3.9m, Vicom’s free cash flow for 2013 clocked in at S$28.6m.

Vicom had also declared final and special dividends that came in collectively at S$0.145 per share, bringing its annual dividends for 2013 to S$0.225. That’s 23.6% higher than the S$0.182 per share in dividends that were paid for 2012.

Operational highlights and the balance sheet

Vicom’s earnings release is short of operational statistics, but it’s still possible to tell that the company’s balance sheet is very strong. Compared to a year ago, its balance sheet has also improved as it still remains debt free while its cash hoard has increased from S$66m to S$78.5m.

What’s next for Vicom

Vicom’s profits have almost doubled from S$15.8m in 2008 to S$28.4m in 2013, representing compounded annual growth rates of 12.4%. Along the way, the company’s dividends have also grown in every consecutive year, as shown below:

Year

Dividends per share

2008

S$0.0925

2009

S$0.118

2010

S$0.161

2011

S$0.176

2012

S$0.182

2013

S$0.225

Source: S&P Capital IQ; Vicom’s 2013 earnings release

The company’s profit growth has also propelled its shares to rise in price by 210% since the start of 2008 even as the broader market, as represented by the Straits Times Index (SGX: ^STI), has declined by 13%.

But while the company’s historical growth rates have been great, there’s a possibility it might slow down in 2014 based on its outlook. In its 2013 earnings release, Vicom mentioned that demand for its vehicle testing services (30% of overall revenue in 2010) would likely dip a little as “more vehicles are expected to be deregistered in the year.” For Vicom’s other businesses outside vehicle testing, “it is expected to grow despite the keen competition.”

Valuation

Shares of Vicom closed at S$5.64 on Tuesday. At that price, the company’s valued at 17.5 times trailing earnings and carry a trailing dividend yield of 4% based on its pay-out of S$0.225.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.