VICOM Limited is Near its 52-Week Low Price: Is There Light at the End of the Tunnel?

VICOM Limited (SGX: V01) was started in 1981 and it is the leading provider of technical testing and inspection services in Singapore. The firm is also a subsidiary of ComfortDelGro Corporation (SGX: C52), the world’s second-largest transport company.

At the time of writing, VICOM’s shares are trading at S$5.70. This is cutting it close to its 52-week low price of S$5.59.

One possible reason for the share price weakness is that the firm is facing a harsh business environment.

For the financial year ended 31 December 2016 (FY2016), the firm saw its revenue decrease by 5.2% year-on-year, or S$5.5 million, to S$101.2 million while net profit fell by 10.4% to S$28.2 million. The poor performance was due to a decline in the number of vehicle inspections for the year.

A record number of 88,317 private cars were de-registered in 2016, 23% more than the previous year. When more cars are de-registered, there will be fewer cars older than three years needing inspection. According to Land Transport Authority, private cars below three years old do not need to be inspected.

Its non-vehicle testing business, Setsco, also weakened due to the general slowdown in the industries that it serves.

For the second quarter of FY2017 (2Q2017), which is the latest reported quarter, revenue sank 5.2% year-on-year to S$24.1 million while net profit tumbled 8.3% to S$6.1 million.

2Q2017’s results were worse than 1Q2017’s where revenue slipped 4.9% year-on-year and net profit fell 6.4% to S$6.9 million.

The firm provided the following outlook during its 2Q2017 results announcement:

“Business conditions are expected to remain challenging for the Group. The vehicle testing business will continue to face a high de-registration rate although this will be offset partially by the increase in the number of Certificate of Entitlement (COE) revalidations.

The non-vehicle testing business will continue to weaken with the general slowdown in the industries that we serve.”

It looks like VICOM Limited’s business could more see darker days ahead before any uptick happens. This is something investors should keep in mind.

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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 contributor Sudhan P owns shares in VICOM Limited.