Vicom share price crashed to record low!

Lifetime Membership The last time that I covered Vicom was on 16 December 2021. In that article, I had predicted that Vicom share price would hover somewhere between $1.90 and $2.10 within the next few years, which it did for the most part of 2022 and early 2023. However, the wheels suddenly came off the wagon as Vicom share price stunned investors to collapse to a low of $1.28 on 27 October 2023.

The volatility of Vicom share price is not common though the counter has been on a long-term bearish trend in the past few years. Therefore, I can imagine some of the investors being shaken as the train-wreck of Vicom share price came out of the blue with no warning signs. An SG Wealth Builder Lifetime Member is concerned about the sudden loss of form for Vicom share price and requested my insight.

I did a quick check on the SGX short-selling activities of Vicom shares and verified that the collapse of Vicom share price was unlikely to be caused by the short-sellers. In fact, on most trading days, there were no short sells on this counter at all. Even on those days in which there were, the level of short-selling volume would not have triggered the explosive free fall of Vicom share price as the volumes were typically a few hundreds to a few thousands shares being shorted. On this note, I think we can safely rule out any foul plays. Then, what could have caused the crisis of confidence of Vicom share price?

In the stock market, investors’ sentiments prevail. Being the largest vehicle inspection and testing provider in Singapore, the perennial thinking among Vicom investors is that the Group’s business performance is correlated to the car population in Singapore, which may or may not be accurate (I will share my insight on this in the latter part of the article). As COE premiums repeatedly hit record highs in 2023, the concern among Vicom investors is that car ownership will decrease and affect Vicom’s business correspondingly.

If investors look back, Vicom share price reached bottom on 27 October 2023 and then rebounded from November 2023. The rebound coincided with LTA reallocating an additional 1,614 Category A, B and C COEs to the quota for the period from November 2023 to January 2024. This is on top of the 1,895 reallocated COEs that was announced on 13 October. The big increase in COE quota provided a short-term reprieve for Vicom share price. Question now is: should long-term investors bolt for the exit or accumulate on the cheap?

Many investors claim that Vicom is a good company to invest in because of its monopoly in vehicle inspection and testing in Singapore. While I do not dispute this fact, there is a need to highlight that having a monopoly in a small country like Singapore has its limitations. At certain point, you would reach saturation point and growth would be limited. The case will be different if you are talking about bigger markets like Japan, Indonesia, China or US.

The problem with Vicom is that the Group operates predominantly in Singapore. This is the biggest Achilles Heel of Vicom as even its parent company, ComfortDelgro, has spread its wings overseas. While having a monopoly bodes well in Singapore, investors must be prepared that growth would be severely curtailed by the small market size. Another risk for Vicom comes from the non-vehicle inspection business. In this article, I will share my insight on the outlook of Vicom share price in 2024.Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Vicom before. Whether Vicom share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Vicom share price faces trouble from 2024 onwards?

As mentioned in my previous article on Vicom, analysing the outlook for Vicom share price is rather challenging because the Group has stopped breaking down the revenue sources since 2012 after the current CEO took over. This lack of visibility makes it difficult for analysts to assess the business fundamentals of Vicom.

In my perspective, the decision to report both vehicle and non-vehicle inspection businesses as one segment is bizarre. To be honest, I find it difficult to accept the reasons given – increased productivity and efficiency. Although it is not mandatory to break down revenue sources, most companies with diversified revenue sources adopt this best practice. In doing so, investors will then be able to perform a reasonable qualitative assessment of the business outlook.

First off the bat, I expect uncertainties for the Group’s vehicle inspection business in the next few years as [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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