What Investors Should Know About VICOM Limited’s 2018 Third-Quarter Earnings

VICOM Limited (SGX: V01) is a leading provider of technical testing and inspection services in Singapore. Yesterday, the company announced its earnings for the third quarter ended 30 September 2018. Let’s look at the main takeaways from the announcement here.

Financial highlights

Revenue for the reporting quarter grew 2.7% year-on-year to S$25.2 million, up from S$24.6 million a year ago. VICOM said the rise in revenue was due to “higher business volumes”.

Total operating costs rose 1.0% to S$17.3 million. Consequently, operating profit increased by 6.4% to S$8.0 million.

Net profit climbed from S$6.4 million last year to S$6.7 million in the 2018 third-quarter, improving 5.1%. As a result, earnings per share for the latest quarter was 7.58 cents, increasing from 7.21 cents in the corresponding quarter last year.

For the nine-month period, revenue went up by 2.2% year-on-year to S$74.4 million while net profit rose 3.4% to S$20.0 million.

As of 30 September 2018, VICOM had S$92.0 million in cash and cash equivalents with no debt. In comparison, as of the end of 2017, it had S$107.5 million in cash and cash equivalents with zero borrowing.

Operating cash flow for the reporting quarter slumped 37.6% year-on-year, from S$11.0 million to S$6.9 million, mainly due to adverse working capital changes. Capital expenditures in both 2018 and 2017 third quarters were somewhat similar.

Looking ahead

As for its outlook, VICOM commented:

“The Land Transport Authority recently announced that there will be more Certificates of Entitlement (COEs) for the three-month quota period starting from November 2018 compared to the preceding quota period due to premature scrapping of cars bought when the COE prices were high. This is expected to further dampen COE prices leading to more deregistration thereby reducing the demand for the vehicle testing business.

For the non-vehicle testing business, there are signs of recovery in some industries that we serve but competition remains intense. Demand is expected to remain stable.”

VICOM shares ended Wednesday at S$6.02 apiece, giving a trailing price-to-earnings ratio of 20 and a dividend yield of 6%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of VICOM Limited. Motley Fool Singapore contributor Sudhan P owns shares in VICOM Limited.