I've written a couple of backtest posting on Vicom and my last article (here) was about their Q3 results, so this will just be a brief updates on the full year results, growth and dividend payouts for future reference purpose.
The result was very much predicted with low topline and bottomline growth, though it is pretty evident that growth is somewhat slowing. Here is a quick look at the summary appended below.
Full year EPS came in at 34.01 cents fully diluted and EBITDA margin continued to generate strong returns at 38.5% compared to a year earlier at 37.9%. Dividends growth has increased by 20%, making the payout ratio at a current 79.1% for the first time so high, evidently increasing the rationale that the management looked somewhat unsure what to do with their huge cash amount in the balance sheet. I would like to see them grow the dividends a little slower but it appears that the management thinks otherwise. The yield is now at 4.0% based on the current market price of $6.40.
| 2011 | 2012 | 2013 | 2014 | |
|---|---|---|---|---|
| EPS (cents) | 28.7 | 30.0 | 32.2 | 34.0 |
| Growth % | - | 4.3% | 7.4% | 5.9% |
| Dividend (cents) | 17.6 | 18.2 | 22.5 | 27.0 |
| Payout Ratio | 61.3% | 60.8% | 69.9% | 79.1% |
Cash & Cash equivalent has now grown to $91 million and represents more than half of the total asset they have on their balance sheet. Capex amount has remained decent at $5.1 million and if we take a look at the depreciation figure, this looks like it's purely a maintenance Capex without any growth expenditure planted inside. The company continues to generate strong FCF at $32.6 million.
| Cash & Cash Equivalent ($m) | % of Total Asset | CAPEX Requirement ($m) | Net FCF ($m) | |
|---|---|---|---|---|
| 2011 | 55.2 | 41.2% | (12.2) | 22.3 |
| 2012 | 66.0 | 45.5% | (4.6) | 26.0 |
| 2013 | 78.5 | 49.6% | (3.9) | 28.5 |
| 2014 | 91.0 | 53.8% | (5.1) | 32.6 |
Slowing Vehicle Business But Increasing Non-Vehicle Business
The next few years we will be seeing slower growth from the vehicle business as there will be more deregistering over the next 3 years. As mentioned previously, this is just part of a cycle of this business and I am pretty sure the management can see this through.
I have previously inquire the IR regarding the possibility of them hiking the inspection price but they confirmed against it.
The company looks to grow the segment on the non-vehicle business and an indication of the Capex could be one to watch out for. Thus far, I don't see any signs of them growing this segment yet and it appears that this segment of the business is a mystery box which has very limited information. In the meantime, I will keep continuing to monitor this part.
Final Thoughts
The company is still generating very strong FCF and they are building up their balance sheet to be stronger each year. The company remained very clean with no debt borrowings and a relatively low maintenance capex.
If there is one thing I would particularly look out for, it is the increasing payout ratio that has now gone to the 79% level. I would personally like to see this below 70% but this would be an indirect indication of what the management thinks of doing with their cash which yields very low return in today's environment.
Still a keep for now. Vested with 6 lots.
