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7 Highlights From VICOM Limited’s Latest Earnings

VICOM Limited (SGX: V01), or VICOM for short, is a leading provider of technical testing and inspection services in Singapore and has two main divisions – vehicle testing and non-vehicle testing. The group released its first quarter 2019 (Q1 2019) earnings yesterday, which showed a continued rise in revenue and net profit as we enter 2019.

Here are seven highlights from VICOM’s latest earnings report.

1. Revenue rose 4.1% year-on-year to S$25.5 million from S$24.5 million, contributed by overall higher business volumes.

2. The largest expense item in the profit and loss, staff costs, increased by only 2.1% year-on-year to S$10.9 million. Part of premises cost was also re-classified to finance costs as per the new Leases Accounting Standard (SFRS 16), resulting in operating profit rising by 7.4% year-on-year to S$8.8 million.

3. With higher interest income being offset by an 8% year-on-year increase in income tax expenses, VICOM managed to report a decent 4.8% year-on-year increase in profit attributable to shareholders of S$7.3 million.

4. VICOM’s balance sheet remained clean with S$112.8 million of cash and no debt.

5. The group generated S$9.7 million of operating cash flow, higher than the S$6.1 million generated a year ago. Capital expenditure for the quarter was slightly higher at S$1 million compared to last year’s S$694,000 but VICOM still managed to generate S$8.7 million of free cash flow versus S$5.4 million a year ago.

6. Earnings per share were 8.28 Singapore cents for the quarter. Annualised, we get full-year earnings per share of 33.12 Singapore cents. At VICOM’s last traded price of S$6.50, the group was trading at a forward price-to-earnings (PE) ratio of 19.6x.

7. The outlook statement for VICOM was positive for the vehicle testing business as a record high 37,000 old private cars renewed their Certificates of Entitlement in 2018. These older cars will all be subjected to mandatory inspections due to their age. However, for the non-vehicle testing division, conditions remain challenging due to Singapore’s slowing economy.

Outlook for VICOM remains solid

VICOM has once again managed to perform well, growing top and bottom line despite tough overall conditions and amid macro-economic uncertainty. The improved cash flow generation for the group bodes well for investors who rely on this stalwart for consistent dividend income.

Prospects are also sanguine for vehicle testing which should continue to drive the group’s business moving forward. One of the only dampeners is that non-vehicle testing may see revenue and profit declines which will offset the vehicle testing division. Still, with management’s experience and expertise in navigating tough conditions over the years, VICOM should turn out fine even though there may be speed bumps along the way.

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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 Royston Yang owns shares in VICOM Limited. The Motley Fool Singapore has recommended shares of VICOM Limited.