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VICOM Limited’s Latest Earnings: Is a Turnaround Coming Up?

VICOM Limited (SGX: V01) is Singapore’s leading provider of technical testing and inspection services. Yesterday, the firm announced its financial results for the third quarter and nine months ended 30 September 2017.

Here’s a quick rundown of the financial figures from the latest quarter:

1. Revenue for the quarter slipped 3.4% year-on-year to S$24.6 million due to “lower business volumes”. However, turnover was slightly higher than that of the first and second quarter of 2017 where revenue came in at S$24.1 million each.

2. Net profit fell 5.9% year-on-year to S$6.4 million. As compared to the second quarter of 2017, though, the bottom line grew by S$0.3 million.

3. Basic and diluted earnings per share for the 2017 third quarter was 7.21 Singapore cents, down from 7.67 cents seen in the previous year’s corresponding quarter.

4. As of 30 September 2017, the firm had S$99.4 million in cash balance with no debt. In comparison, as of 31 December 2016, it had S$105.7 million in cash hoard. One of the main reasons for the fall could be that VICOM upped its 2017 second quarter dividend by 64%. Even then, the firm’s balance sheet is robust.

5. Cash flow from operations rose for the latest quarter; the figure was S$11 million as compared to S$8.2 million a year ago. Considering that VICOM spent only $924,000 in capital expenditure for the 2017 third quarter, it generated a free cash flow of S$10.1 million, a vast improvement from last year’s free cash flow figure of S$7 million.

For the nine-month period, revenue slipped 4.5% year-on-year to S$72.8 million while net profit tumbled 6.8% to S$19.3 million. VICOM generated a free cash flow of S$21.1 million for the latest period as compared to last year’s S$19.8 million.

Regarding its outlook, in a slight change of tone as compared to the previous quarter, the firm said (emphasis mine):

“The vehicle testing business is expected to remain stable. The recent announcement by the Land Transport Authority that the growth rate for cars and motor cycles will be cut from 0.25% to 0% for the next 3 years from February 2018 has no immediate impact on the vehicle testing business. The non-vehicle testing business is expected to remain weak in tandem with the industries that we serve.”

Shares of VICOM are selling at S$5.79 now. This translates to a trailing price-to-earnings ratio of 19 and a trailing dividend yield of 3.7%, excluding any special dividend.

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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 of VICOM Limited.