VICOM (SGX:WJP) just delivered a blockbuster set of FY 2025 results, proving that it remains a powerhouse in Singapore’s testing and inspection space.

Driven by the island-wide rollout of the ERP 2.0 On-Board Units (OBU), the headline numbers are staggering:

  • Revenue: Jumped 40% YoY to S$167.4 million (with 2H alone hitting S$97.6 million).
  • Net Profit: Surged 45% for the full year to S$42.5 million (2H profit up 78% to S$26.9 million).
  • Dividends: A final DPS of S$0.053 has been proposed – a massive 77% jump from last year’s S$0.030 final payout.

On a full-year basis, the total DPS stands at S$0.084 at a payout ratio of 70%, indicating a strong intent to reward shareholders even during the peak Capital Expenditure (Capex) phase for the Jalan Papan site.

While I’m delighted with VICOM’s record performance, the question remains: Is this S$0.084 dividend a one-off windfall, or the new sustainable floor?

The Group expects overall demand for its testing services to decrease in the year ahead.

Demand for vehicle testing and related work is expected to taper off, following substantial completion of On-Board Units (OBU) installations in 2025.

Demand for non-vehicle testing is expected to increase with the addition of the new testing capabilities when the integrated testing hub at Jalan Papan becomes fully operational in the second half of the year.

– VICOM Media Release, Feb 2026

With the OBU project reaching the finish line, a drop in revenue and profit for FY 2026 is a mathematical certainty.

However, after diving into the underlying data, I believe VICOM could surprise the market by sustaining this record payout even as the OBU hype fades.

Here’s why the ‘post-OBU’ era looks brighter than you might think.

S$0.053 Final Dividend “Signal”?

In the world of SGX dividends, labels matter. Typically, when a company has a one-time profit windfall (like the OBU project), they declare a “Special Dividend.” This acts as a disclaimer: “Don’t expect this next year.”

Interestingly, VICOM labeled the entire S$0.053 payout as a Final Dividend.

By avoiding the “Special” tag, management may be signaling that they aren’t just distributing a one-time bonus, but are comfortable with the new dividend level.

While it’s possible I’m reading too much into the semantics, VICOM has historically used “Special” dividends (like in 2018 and 2019) when they wanted to clearly distinguish between recurring and one-off payouts.

The absence of that tag today is a curious, and potentially bullish, omission.

[Update 5 May]: From the AGM, Chairman shared they did not use “Special” tag as this is directly due to an increase in revenue (though it’s a one-off OBU project). Where as in the past “Special Dividend” was used to indicate a return of capital from divestment and such.

Looks like I really read into it too much.

Why S$0.09 EPS is Probable in FY 2026

To understand the “real” VICOM, we have to look past the OBU noise.

If we use FY 2023 (Pre-OBU) as our baseline, the question is: How feasible is it for VICOM to grow its EPS from S$0.0778 (2023) to S$0.09 (2026)?

That is a ~16% growth requirement over three years (roughly 5% CAGR). This appears highly probable due to three structural shifts:

1. Vehicle Testing: High-Margin Churn and the “PHV Multiplier”

Even with a “Zero Growth” policy for cars, VICOM wins when the fleet turns over faster.

  • The “New Car” Premium: We are entering a peak deregistration cycle. Every old car scrapped is replaced by a new one that must undergo mandatory Registration Inspections and Type Approvals.

    These specialised tests generate S$300–S$500 per vehicle, which is far more lucrative than the standard S$76 periodic check.
  • The PHV Proportion: Since 2023, the proportion of Private Hire Vehicles (PHVs) has grown from ~12% to nearly 15% of the total fleet.

    This is a massive tailwind because PHVs are “inspection-heavy”: they require annual checks from Year 1, and those older than 10 years must now visit VICOM every 6 months.

    VICOM is effectively getting more “visits” out of the same number of cars on the road.

2. Jalan Papan: From Capex Drag to Cash Cow

The S$60 million Integrated Hub at 2E Jalan Papan is transitioning from a cost center to a profit center.

  • Passive Rental Income: For the first time, VICOM is a significant landlord. Leasing out excess workshop space at an estimated S$2.50 per sq ft creates a recurring, high-margin revenue stream that was non-existent in 2023.
  • Operational Synergy: By consolidating the old Pioneer site into this purpose-built facility, VICOM eliminates redundant rental overheads and logistical friction. This consolidation helps protect margins even as the OBU revenue tapers off.

3. SETSCO: Moving Up the Value Chain

VICOM’s non-vehicle testing arm, SETSCO, is successfully pivoting away from low-margin legacy testing into high-barrier niches:

  • The EV Opportunity: As Singapore’s EV population ages, SETSCO is leveraging Jalan Papan’s advanced equipment for specialized Battery Life-cycle and High-Voltage Safety testing. These command much higher premiums than traditional soil or concrete testing.
  • The Green Economy: SETSCO is now a key player in Singapore’s “Green Plan 2030,” expanding into Carbon Accounting and Sustainable Material Certification. These sectors offer significant pricing power as companies scramble to meet new environmental regulations.

Higher Payout Ratio and Free Cash Flow

If VICOM achieves an EPS of S$0.09, sustaining an S$0.084 dividend would require a payout ratio of roughly 93%.

While this might seem aggressive at first glance, it is far from unprecedented for a company with VICOM’s track record.

For years, a 90% payout was the group’s de facto policy, only being dialed back to 70% as a temporary measure to preserve capital for the S$60 million Jalan Papan investment.

With that massive project now behind them, the original justification for a lower payout has effectively vanished.

Furthermore, with capital expenditure set to drop significantly, free cash flow is poised to outpace net profit, providing management with ample “hidden” cash to distribute.

Supported by a debt-free balance sheet and a S$57.9 million cash pile, VICOM is well-positioned to return to its historical role as a high-payout dividend stalwart without compromising its financial stability.

Sure Boh?

No investment thesis is 100% certain, and my projections rely on several key execution assumptions.

The most immediate risk is the successful monetisation of the Jalan Papan hub; there is no guarantee that VICOM can fill its excess workshop space or achieve the targeted rental yields.

Similarly, while SETSCO is moving into high-value niches like EV battery testing, this is an increasingly competitive arena that requires constant technical evolution to protect those higher margins.

Finally, you must consider management’s capital allocation strategy. Amidst an uncertain global economy, the board could choose a more conservative path, opting to stick to the current 70% payout ratio to maintain a “dry powder” cash reserve.

However, even if we take this middle path, the numbers remain compelling.

A 70% payout on my projected S$0.09 EPS results in a dividend of S$0.063.

When you factor in the company’s history of “catch-up” payments and their massive cash reserves, a S$0.07 dividend floor feels like a very safe bet.

At the recent closing price of S$1.72, that translates to a solid 4.1% yield. For patient investors, this provides a comfortable baseline with significant upside potential once the post-OBU dust settles.

Disclaimer

This content is for informational only. I am not a financial advisor, tax professional, or legal expert, and the information shared here does not constitute personalised financial advice, nor is it a solicitation to buy or sell any securities or financial instruments.

All opinions and commentary reflect my personal views and are based on general market commentary.

You are solely responsible for your own financial decisions. Investing involves risk, and any action you take based on the information provided on this blog or channel is strictly at your own risk.

Always conduct your own research and due diligence and consult with a qualified, licensed financial professional, tax professional, or legal advisor before making any investment or financial decision.