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Watchlist for March 2018 [Update]

Due to the nature of my investment strategy, earnings release would usually cause movements in what it deems as an attractive stock (Above average business at below average prices).

I will be zooming into these 2 stocks for my purchase in 2Q18. My plan is to put SGD 11,250 in each of these 2 counters and hold it for at least a year before reviewing them again.

The first of which was mentioned in my previous post:

VICOM Limited (SGX: V01)

Current Strategy Statistics as of 26th Feb 2018
Market Cap: SGD 534mn
EBIT/Enterprise Value: 7.1% (Ranked 13th)
EBIT/(Net working capital + Net Fixed Assets): 94.7% (Ranked 3rd)

Almost every driver/rider on the road knows VICOM, including myself. It is majority owned by ComfortDelGro, you know, the taxi company. Revenues dipped 4.15% YoY in FY17, which indicates that motorists may be taking their vehicles to other inspection centres.

A quick search on Google shows that there are 3 main vehicle inspection centres in Singapore, namely VICOM, STA, and JIC. It is worth noting that VICOM owns 78% of JIC which effectively means that VICOM is the market leader in Singapore (74.4% as of 2015). Couple that with high barriers to entry, you got yourself a business with a low threat of new competitors.

Naturally, an increase in the number of vehicles would indicate a stronger growth potential for VICOM. According to LTA's Annual Vehicle Statistics, there was a slight growth in total motor vehicles of 0.57%. Nevertheless, vehicles need to be serviced numerous times which results in recurring income for the business.

Additionally, the dividend yield on the business is attractive at 3.8% YTD. A final dividend of SGD 0.2288 has been proposed for FY17 (FY16: SGD 0.085). The balance sheet of VICOM is healthy with no debt with cash and equivalents at SGD 107.5mn. Gross and EBITDA margins have been stable at above 45% and 37% respectively throughout the past 5 years.

Overall, I like this company and will continue to monitor it before deciding to allocate some capital in about 3-4 weeks time.

The 2nd stock, which recently fulfilled my screening criteria, is currently right on the TOP of my list indicating that it is the best mix of above average business and below average prices. I will share my analysis of this stock in the next few days, so remember to check in for updates!


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