VICOM (26 Sep 2021 - SGD 2.01) - Dividend calculator - (IV = 1.3 , 5 percent)

Business Overview

Vicom is company that doing vehicle inspection. Vicom holds 100 percent stack of Setsco and Setsco is a company doing testing (ie. NDT, water test and etc). Vicom has total 7 locations doing vehicle inspection business and 1 location doing non-vehicle testing business. 

2020 Financial Summary

Year 2019, Vicom has exercise 4 to 1 stock split. 

From the table, we can observed that Revenue is hovering around 100mil. Due to pandemic in 2020, business is impacted and only able to achieve 86mil. Average operating profit is at 34.2mil. Return on equity is around 20!!! What a good company!!!

Income statement (1H2021) 

1st half revenue increase 23 percent due to Singapore is slowly loosen the control. Besides that, Singapore also provide support 1.2mil for the company. PAT increase 23 percent. 

Balance Sheet

From the balance sheet, we observed that company cash reduce 12mil. This is due to dividend given to shareholder about 22mil. Other than that, there is not much changes. 

Cash flow

Company generated positive operating activities about 12mil and capex only 8mil. FCF - 4mil. 

Company dividend policy is 90percent of the profit. But in 2017 and 2018, they declare 120percent of profit for dividend

My thought

Vicom from SGD2.25 dropped to SGD2, drop about 12 percent. 

Let's have a rough calculation on this stock whether it worth to buy it. 

EPS: 3.38 X 2 = 6.76 

P/E : 30

ROE: SGD 24MIL / 125MIL = 19%

This stock not a growth. Hence, we should use dividend approach to calculate the intrinsic value. 

Avg dividend - SGD0.066

My dividend expectation is at least 5 percent for Singapore stock. 

DY = 0.066 / X *100 = 5

IV = SGD1.3 

Current DY - 0.066/2.01 = 3.2%

Even though company provide 120% dividend in year 2017 and 2018, but in one day it will definitely stop paying for 120% as the cash will keep dropping and remain 90percents. For conservative investor, we will plan for the worst and hope for the best. 

Although the company has high margin of profit , no debt and high ROE. But it still not a stock that worth to hold at this moment. 

VALUETRONIC (12 Sep 2021 - 0.59) FY2021

Financial information - FY2021 (Mar 2020 - Mar 2021)

Valuetronic FY2021 report, from the table we can notice that Revenue contributed by CE drop significantly, this is due to was due to a key customer experiencing weak demand and its production switch-over from the Group’s China factory to another vendor in an ASEAN country as scheduled.

For ICE, the surge in demands in logistic industry and e-commerce benefited several key customers

during the pandemic lockdown. The prolonged pandemic also caused a delay in the schedule of a customer in the auto industry in its production switch-over from the Group’s China factory to another vendor in North America, which led to continued orders from that customer during FY2021.

Vietnam Campus

Vietnam campus will commenced by end of FY2022 (Mar 2022). It provides EMS, machining and injection molding services. 

My thoughts

From previous report management team keeps highlighted revenue will drop significantly. Need to wait for next half year report to know the shifted of the company will caused how much drop in revenue. From the other EMS industry, seem like they are in ramping stage but Valuetronic is slowing down. Management unable to keep the current customer causing revenue drop. 

From the report, the group revenue is contributed by 4 main customers and each contributed more than 10 percents of the revenue. This is a big risk due to depends on the main customer, the group should diversify the customer. 

Let's have a brief calculation. 

If revenue drop 20percents for next quarter. 

2021 Revenue drop 20 percents - 2281mil x 0.8 = 1824 mil 

Net profit margin - 7.5%

Net profit = 136.8mil

Ordinary shares = 435,048,782

EPS = HKD 0.31 = SGD0.053

With current price - 0.59 

PE = 0.59 / 0.053 = 11.13