SBS Transit Grows For The Third Quarter – Can It Continue?

SBS Transit Ltd. (SGX: S61), the ubiquitous bus and rail operator in Singapore, released its third-quarter results on Wednesday.  SBS is part of ComfortDelGro Corporation Limited (SGX: C52), the world’s second largest land transport company. Its locally-listed competitor is SMRT Corporation Ltd. (SGX: S53).

Some Financial Numbers

For the latest quarter, total revenue was at S$248.6 million, an increase of 13.6% year-on-year. Both the Bus and Rail segment put on a good showing for the third quarter.

Revenue from the Bus segment grew 11.8% year-on-year to S$197.6 million, due to the increases in average daily ridership and average fare, higher advertising sales, increased rental from renewals and higher other operating income.

On the other hand, revenue from the Rail segment went up 21.3% year-on-year to S$51 million, due to the commencement of Downtown Line (DTL) 1 operations resulting in increases in average daily ridership and average fare, and  higher advertising sales and higher rental from new shops. DTL 1 started operating on 22 December 2013.

Net profit for the quarter surged 62.2% year-on-year to S$5.7 million, on the back of better operating profit.

Ridership Data

Average daily ridership for the buses went north by 3.1% to 2.8 million passenger trips. For the rails, average daily ridership for North-East Line (NEL) grew by 7.1% to 527,000 passenger trips while that for Light Rail Transit (LRT) increased by 9.5% to 89,000 passenger trips. Average daily ridership for DTL 1 was at 68,000 passenger trips.

Going Forward

SBS Transit said that revenue is expected to be higher from higher ridership and higher average fare. Bus ridership growth is expected to be maintained while rail ridership is expected to experience higher growth with the new DTL 1.

However, both segments will not see cost pressures easing any time soon, SBS Transit added.

Staff costs are expected to be higher due to an increase in number of employees due to the build-up for Bus Service Enhancement Programme and DTL 2, and salary adjustments. Staff expenses surged 18.1% year-on-year for the third quarter, going up more than revenue increment (13.6%). Staff expenses have steadily increased from 43% of total revenue in 2012, 45.6% in 2013 and 47% in the latest quarter. Investors should keep a note on this as ballooning staff costs can eat into the bottom line.

Depreciation and financing costs are also expected to go up due to the renewal and expansion of the bus fleet. DTL 2 is expected to be completed in the first quarter of 2016.

SBS Transit shares closed at S$1.57 on Wednesday.

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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.