SMRT Still On Rough Tracks

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SMRT Corporation Limited (SGX: S53) posted a revenue rise of 5.3% to S$296.3 million in the second quarter of 2014 (2Q 2014) as compared to 2Q 2013. This was mainly due to broad based revenue growth particularly in the non-fare businesses of Rental, Advertising and Engineering and Other services.

The revenue from the fare businesses such as Train, LRT and Bus increased 3.6% year-on-year while the revenue from non-fare businesses rose 11.0% year-on-year. SMRT cited that “the fare business remains challenging despite healthy ridership growth as fares have not been adjusted to reflect the higher operating costs.”

The net profit, however, was down 56.8% to S$14.4 million for the quarter mainly due to an increase in operating expenses of 15.8% to $285.8 million because of higher staff, repair and maintenance, and depreciation costs.

The company has a total borrowing of S$625.8 million as of 30th September 2013. The cash balance stands at S$104.7 million. It generated S$128.8 million from cash flow in operations in 2Q 2014 as compared to S$134.6 million generated in 2Q 2013.

SMRT has declared an interim dividend of 1.0 Singapore cent per ordinary share to “reward shareholders for their continued support”

SMRT’s President and Chief Executive Officer, Mr Desmond Kuek, said, “We continue to make good progress in improving service frequency and reliability in our Train and Bus operations. The financials for the fare business remain challenging. We continue to discuss with the authorities on details for a timely transition to a viable and sustainable model for the Train and Bus businesses. We are also growing our non-fare business locally and overseas. The Woodlands Xchange will officially open in November and will contribute to rental profits this year. We recently entered a consortium to participate in opportunities in the Jakarta monorail project, which will position us for growth in international markets.”

SMRT, which was once part of the Straits Times Index (SGX: ^STI), was booted out of the index in early 2011 and was replaced by Global Logistic Properties (SGX: MC0), the largest provider of modern logistics facilities in China, Japan and Brazil.

For the past five years, SMRT has lagged the STI by 19.25%. The company used to have a strong following from the investing community due to the consistently increasing dividends it had paid out. In 2004, it paid a total dividend of 4.5 Singapore cents and this increased yearly, without fail, to a peak of 8.5 Singapore cents in 2011. This translates to a compounded annual growth of 9.5%.

However, ever since the massive disruptions of rail services back at the end of 2011, SMRT has not been doing well in terms of profit or cash flow growth. Dividends were cut and the market did not take it well. Currently, SMRT is trading at S$1.30, which is flirtingly near the five-year lows of S$1.28.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.