How Did SMRT Fare for the Year?

smrt logoSMRT Corporation (SGX: S53) released its results for the full year of 2014 on Wednesday. SMRT is one of the two main transport operators in Singapore. The other being ComfortDelGro Corporation (SGX: C52), which owns a majority share in SBS Transit (SGX: S61).

SMRT derives revenue from ridership of its trains, LRTs (light rail transit) and buses – collectively known as “fare sources” – and also from “non-fare sources” such as taxis, rental, advertising and engineering and other services.

For the full year, revenue increased 4% year-on-year to $1.2 billion due to higher revenue in all business segments, except LRTs and other services. The revenue from fare sources was up 2.7% to S$851.9 million while the revenue from non-fare sources gained 7.6% to S$312 million.

Total operating expenses rose 7.3% to $1.1 billion, due mainly to higher staff costs, depreciation and other expenses.

SMRT’s fare sources recorded an operating loss of $25 million as compared to an operating profit of S$32.3 million last year. For train operation, despite a 2.9% increase in ridership, operating profit plunged 91.6% to $5.5 million from $65.1 million in the previous year. This was due to operating costs outpacing fare revenue growth. Train operation was the only segment that raked in operating profit under the fare sources.

Operating profit from the non-fare sources increased by 12.4% to S$106.4 million, mainly due to an increase in profits for taxi, commercial and engineering services. Taxi profits ballooned 49.7% to $9.6 million, due to higher rental contribution from a newer fleet and lower diesel tax as a result of a smaller diesel fleet. Rental profits, the highest contributor of operating profit for the non-fare sources, increased 9.6% to $73.4 million. This was because of an uptick in lettable space from the redevelopment of Woodlands Xchange and higher rental renewal rates. All the segments under non-fare sources were profitable, except other services, which saw an operating loss of S$1.2 million.

Overall, net profit for the year slumped 25.7% to S$61.9 million. Consequently, earnings per share was down 25.8% to 4.1 Singapore cents.

As of 31st March 2014, SMRT had a total borrowing of S$636.4 million against a backdrop of cash balances of S$146.9 million. It is in a net debt position of $490 million, an increase from that of S$277 million exactly a year ago. Return on equity for the year was at 7.9%, a decrease of 2.8 percentage points from last year.

The firm generated a cash flow from operations of S$234.4 million for the year, decreasing 10% year-on-year. It spent S$651.9 million in capital expenditures as compared to S$250.6 million last year.

SMRT has proposed a final dividend of 1.2 Singapore cents per ordinary share. Including the interim dividend of 1.0 Singapore cent, the total dividends that will be paid out for the year will be 2.2 Singapore cents. This translates to a dividend yield of 1.8%, at the closing price of S$1.22 on Wednesday.

Going forward, the transport operator will continue with its productivity efforts in the new financial year to help mitigate the declining profitability in the fare business. It also expects the imminent changes to the rail financing and bus operating models to address the sustainability of its fare business in Singapore. Furthermore, it is awaiting the launch of the new Sports Hub retail mall, which the firm will be jointly-managing with NTUC Fairprice and is just a stone’s throw away from its Stadium Circle Line station.

SMRT is currently trading at 30 times its latest earnings.