Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX</strong>.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<h2>Vicom Ltd</h2>
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<h3>Hold up for an inspection</h3>
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<p>Fairly valued for a stable play</p>
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<p>Stable vehicle inspection business boosted by higher COE renewals</p>
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<p>Recovering non-vehicle testing business and margins</p>
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<p>We initiate coverage with HOLD and TP of S$2.13</p>
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<p><strong>Fairly valued for a stable play.</strong> While we see favourable developments in VICOM’s vehicle inspection business and a recovering non-vehicle testing business, we believe there is limited upside based on valuations. VICOM is currently trading at 32.9x FY21F earnings (+1.3SD) and an FY21F dividend yield of 2.7% despite our expectations that earnings will below pre- COVID levels in the next two years.</p>
<p><strong>Stable vehicle inspection business and favourable trends. </strong>VICOM’s vehicle inspection business is largely stable and resilient against economic downturns. Recently, we have noticed favourable trends brewing in the car inspection space and believe that VICOM stands to benefit as the market leader. These trends are namely, rising Certificate of Entitlement (COE) renewals and declining passing rates.</p>
<p><strong>Recovering non-vehicle testing business and operating margins. </strong>We expect a sequential improvement in SETSCO in FY21F, with the main driver being the biomedical industry due to demand for COVID-related products such as surgical gloves and testing. As business at SETSCO picks up, we are expecting VICOM’s margins to gradually recover on higher operating leverage.</p>
<p><strong>Valuation</strong>:<br>Initiate with HOLD and TP of S$2.13. To derive our TP, we used a blend of 5-year DCF valuation and FY21F forward PE valuation. The key assumptions include a WACC of 4.8% and terminal growth rate of 1.0% for our DCF model, and a 34.0x FY21F PE multiple for our PE valuation method.</p>
<p><strong>Key Risks to Our View:</strong><br>Tightening of COVID-19 measures in Singapore.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.





Vicom Ltd



Hold up for an inspection





Fairly valued for a stable play


Stable vehicle inspection business boosted by higher COE renewals


Recovering non-vehicle testing business and margins


We initiate coverage with HOLD and TP of S$2.13





Fairly valued for a stable play. While we see favourable developments in VICOM’s vehicle inspection business and a recovering non-vehicle testing business, we believe there is limited upside based on valuations. VICOM is currently trading at 32.9x FY21F earnings (+1.3SD) and an FY21F dividend yield of 2.7% despite our expectations that earnings will below pre- COVID levels in the next two years.
Stable vehicle inspection business and favourable trends. VICOM’s vehicle inspection business is largely stable and resilient against economic downturns. Recently, we have noticed favourable trends brewing in the car inspection space and believe that VICOM stands to benefit as the market leader. These trends are namely, rising Certificate of Entitlement (COE) renewals and declining passing rates.
Recovering non-vehicle testing business and operating margins. We expect a sequential improvement in SETSCO in FY21F, with the main driver being the biomedical industry due to demand for COVID-related products such as surgical gloves and testing. As business at SETSCO picks up, we are expecting VICOM’s margins to gradually recover on higher operating leverage.
Valuation: Initiate with HOLD and TP of S$2.13. To derive our TP, we used a blend of 5-year DCF valuation and FY21F forward PE valuation. The key assumptions include a WACC of 4.8% and terminal growth rate of 1.0% for our DCF model, and a 34.0x FY21F PE multiple for our PE valuation method.
Key Risks to Our View: Tightening of COVID-19 measures in Singapore.














(Non-SGX Report) Vicom Ltd: Hold up for an Inspection