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Archive for April, 2011

There’s an active discussion regarding VICOM at one of the local investing forums – Value Buddies.

Let’s go through the qualitative aspects of the company first.

I think VICOM has a narrow economic moat at the very least for its vehicle testing services.

The good thing about their business is that their profits are recurring. You have to get your car certified with them at some point in your lives.

Lets look at the fundamentals of the company.

Revenue & Earnings

VICOM has been growing its bottom line really well over the past few years.

Its average annual growth rate is an astonishing 18.2%.

Financial Leverage

The great thing about VICOM is that its a very cash rich company. It has no debt on its balance sheets – a very big plus for me.

Returns on Equity

Returns on Capital are nearly identical to Returns on Equity as there are no borrowings.

Average ROE is 18.3% which is great.

Free Cash Flow Per Share


Free cash flow has also been growing at a reasonable rate – about 10% per annum since 2004.

It’s important to note that Free Cash Flow growth is sometimes slower – especially when a company is expanding it’s operations.

Conclusion:

VICOM was a real surprise find for me. High returns on capital, good growth rate, and a reasonable price all add up well.

VICOM in my opinion, wont be surprising anyone with high growth rates or sudden surges in profits anytime soon. However, if your a long term investor, VICOM will probably do quite well for you over time.

Disclaimer – The author has no position in VICOM at the time of writing.

 

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Dear Readers,

Thanks for your continued support up till now.

I have recently changed the domain name from sgValueInvestments to Singapore Investing.

Do bookmark the new URL at Singapore Investing.

 

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As promised, I did up a financial report of Challenger Technologies.

Let’s go through the qualitative aspects of the company first

If your living in Singapore, you pretty much know everything there is to know about Challenger. Its a simple business model – selling a wide array of electronic goods throughout the island. Loo Leong Thye has done an impressive job of growing Challenger from its store in Funan to recognizable brand around Singapore.

I really like businesses that have great franchise models (think McDonalds, Starbucks, KFC). A proven success formula is always preferable to a business model that is tested & unproven.

Now, lets look at the quantitative data –

Revenue & Earnings

Revenue & Earnings have been increasing steadily over the years. This is probably due to the expansion of Challenger Technologies into different parts of Singapore.

Return on Equity

Challenger has also done exceedingly well on this front.

Its Average Return on Equity over the past few years is 31.2%.

Financial Leverage

What really liked about Challenger was that it had almost no debt on its balance sheets.  Returns on capital are almost identical for that reason.

Free Cash Flow Per Share

Free Cash Flow – like Revenue and Earnings has grown comfortably over the past few years.

Always look out for companies with consistent and healthy free cash flow. Free Cash Flow allows companies to fund their acquisition’s/expansions/capital expenditures easily without much debt.

Always remember – Cash is King.

Conclusion:

I like Challenger Technologies a lot.  Before the run-up in price, I found Challenger trading at an extremely attractive valuation. Its price has since appreciated around 50% in the last 3 months (mainly due to the shares issue) so it offers a much smaller margin of safety than before.

Nonetheless, I recommend keeping it on a “To – Watch List” for any price dips. I think that Challenger will continue to growth steadily over the years without much hiccup.

Disclaimer:  The author is long Challenger.

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Hi guys, sorry for the lack of updates.

I been busy with my other projects. I will be updating my site more regularly over the coming weeks so keep a look out! I will be hoping to cover the valuation of more Singapore companies (if you have any requests do let me know) that I find attractive.

I plan to do fundamental analysis on Challenger Technologies next.

Interestingly, something that has struck my attention is the valuation of quality companies in the US. By quality, I am talking about the great brands like Johnson & Johnson, Intel, Microsoft etc. They are selling at extremely attractive valuations. I will be covering more on this in my subsequent posts.

I will also be posting a “guide” on how to open an account with optionsXpress and with my experiences with it so far (its been a positive experience up till now).

Finally, I have been working on a new website dedicated to Warren Buffett. I also posted a fundamental analysis report of his recent acquisition of Lubrizol Corporation.

Do check it out at  http://www.buffett-investing.com/warren-buffett-lubrizol.html

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