Saturday, February 11, 2012

VICOM - FY 2011 Quick Update (Edited)

FY 2011 result has been announced today and I will do a short summary before the annual report is released.

For the Financial Year 2011, VICOM has achieved a profit growth of 14.2% to achieve a profit after taxation of $25.5m. While revenue increases by 8%, operating expense increases only by 6.4%, thus resulting in a 14.2% profit growth. Operating profit margin and net profit margin reach a new record of 33% and 28.1% respectively.

For the balance sheet, Cash and Bank Balances increases by 6 million to reach a high of $55m and of course without any debt. Trade receivables increases from $7m to $10.5m. Vehicles, Premises and Equipment increases from $49m to $55.5m, likely due to the finished construction of new building at Teban Garden.

FCF is at $18m due largely to purchase of Vehicles, Premises and Equipment of $12m. For the past 2 years, spending on this area has been at record high due to the construction of new building and laboratory. With its completion, FCF will be able to improved significantly baring any unforeseen circumstances. However, FCF/ Net Profit is still at a very healthy 70% despite this increased spending.

A final dividend of 7.5 cents and special dividend of 3.2 cents has been declared, totalling 10.7 cents, compared to a final dividend of 6.6 cents and special dividend of 3.2 cents. Total dividend for FY 2011 is 17.5 cents, which is a 4.49% yield based on current price of $3.90.

The only part that I am unhappy about is the increase in share capital from $31.4m to $34.4m, which results in a modest increase of 11% for EPS. This will have to wait until the annual report is out but from what I know the share option available is around 10%.

I just got the options and share capital figured out.
For FY 2011, a total number of 1,505,000 options were exercised, representing a 1.74% increase in total number of shares from 86,358,000 to 87,863,000. 779,000 options are not yet exercised and represent 0.89% of total share capital.

The reason for the 10% increase in share capital is that the original share was issued at a price of $0.50. This latest exercise of share option was done at an average price of $1.91, thus increasing the total share capital by a huge amount.

Many might have been worried about the share option, but I have just found out that this was in fact due to the "2001 VICOM share option scheme":

Resolution 11 is to authorise the Directors to issue shares upon the exercise of options in accordance with the 2001 VICOM Share Option Scheme. This scheme was approved by Shareholders at the Extraordinary General Meeting held on 27 April 2001 and has a maximum duration of 10 years. The aggregate number of shares over which the Committee may grant options under the scheme for its entire duration is limited to 15% of the issued ordinary shares in the capital of the Company excluding treasury shares from time to time. 2010 was the last year for which new options were granted under this scheme. The Company is not seeking a renewal of the scheme.

From 2006 onwards, no options would be granted to non-executive Directors."

Through some calculation, total number of share options granted in FY2011 stands at 24,000, which is likely to be only for the top management. Thus, option will not be a concern for those who have bought in 2011 onwards since only 0.89% is not yet exercised. However, we do need to be careful if the company is seeking a new share option scheme.

The number of vehicles due for inspection is expected to remain high as the de-registration rate of vehicles continues to be low.
With a comprehensive range and variety of services, it is expected that the test and inspection business will continue to sustain its performance despite the anticipated economic slowdown."



  1. Hi,

    The net profit margin is lower if you use $25.1 million net profit from "Attributable to Shareholders of the Company". The net profit margin is lower at 27.66%.

    1. Because I have created a spreadsheet, so i will just key in the number and get the answer. For the sake of consistency, i will always like to use the same data for as many FY as possible so that I can get a good picture of how the situation is changing.

      Nevertheless, thanks for highlighting it. 27.66% will still be a record net profit margin.

  2. Great analysis ! I didn't do that much of a homework when I bought it. Basically, I complied the historical financial data on a spreadsheet and did some kind of quantitative analysis, read about the company, saw that the price was right and bought it. Sitting on a neat profit now but I'm still holding it.

    1. it's good to try to understand as much of a company as you can so that you will be able to react to any positive or negative market, fundamental, policy changes effectively.

  3. Any idea if the higher capex is going to be a continuing trend going forward?

    1. From what i see for the past 8 years of results, capex is very low at a range of 2-4.5m when there is no unusual item. What i mean by unusual item will be the CDST built in 2006 for the mandatory cdst inspection in 2007, VETL built in 2009 in cooperation with LTA, and the new HQ cum laboratory building in 2010 and 2011.

      Going forward, capex is likely to be greatly reduced unless some unusual items appear. But then again, each of these unusual capex are well taken to increase revenue source. CDST is an additional $17 for every diesel vehicle in Singapore. VETL is a $2000-$4000 for every approval of vehicle type. Other than the new building which the management says can improve efficiency (need to see if this will result in efficiency in SGA cost next year)

      VICOM is a business that does not requires much CAPEX to grow. Even in the past 2 years where CAPEX are exceptionally high, FCF/ Net Profit is still at an impressive level of 70%.