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  • 3Q21 normalised earnings increase 23.7% y-o-y, in line with our expectations
  • Vehicle Testing business is stable and operating at pre-COVID levels
  • Non-Vehicle Testing business continues to face challenges, but is gradually recovering
  • Maintain HOLD and TP of S$2.13

Results Highlight

S$’m3Q213Q20y/y %
Revenue26.322.2+18.4%
Operating Profit7.56.2+21.1%
PATMI6.36.8-7.2%
Government Grants0.52.1-76.9%
Normalised PATMI5.84.7+23.7%

Key Operational Updates:

  • VICOM’s Vehicle Inspection business is stable and operating at pre-COVID levels.
  • The higher revenue was mainly due to continued improvement in its Non-Vehicle Testing business.
  • However, activities in the Construction, Marine, and Process (CMP) industries have slowed down as a result of a rise in COVID-19 cases.
    • These industries continued to be affected by supply chain disruptions and shortage of labour due to border restrictions.
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Our Thoughts
3Q21 results are in line with our expectations. Operational results are largely stable. Going forward, we continue to expect a gradual recovery in its Non-Vehicle Testing business. While we see positive developments in its vehicle inspection business such as the rising trend of COE renewals, decline in passing rates of car inspections, favourable age distribution of cars, and a recovery of its non-vehicle testing business, we believe there is limited upside based on valuations.

  • DCF-based TP of S$2.13 and trading at 33.0x FY21F PE (+1.2SD of its 4-year historical mean)

Maintain HOLD and TP of S$2.13.