SBS Transit Ltd’s Latest Earnings: What Investors Should Know

SBS Transit Ltd (SGX: S61) reported its fiscal third-quarter earnings yesterday. The reporting period was for 1 July 2015 to 30 September 2015.

SBS Transit is a subsidiary of land transport giant Comfortdelgro Corporation Limited (SGX: C52). Singaporeans may recognize SBS Transit’s namesake buses and the Downtown MRT line that it operates. With that, it may not be a surprise to know that the company has two business segments, namely Bus and Rail.

You can learn more about the company in here and here. You can also look up the previous quarter’s earnings here.

Financial highlights

The following’s a quick take on SBS Transit’s latest financials:

  1. Quarterly revenue for SBS Transit rose by 5.4% year-on-year to $262 million with growth coming from both business segments.
  2. Net profit attributable to shareholders, though, fell 5% year-on-year to $5.5 million. The transport company had benefited from lower fuel and electricity costs, but this was overtaken by higher staff costs and depreciation expense.
  3. Consequently, earnings per share (EPS) decreased from 1.86 cents in the third-quarter of 2014 to 1.77 cents in the reporting quarter, a decline of around 5%.
  4. For the third-quarter of 2015, cash flow from operations was $5.9 million with capital expenditures clocking in at $34.3 million. Unfortunately, this puts SBS Transit in negative free cash flow territory to the tune of $28.4 million. These figures were an improvement from a year ago when SBS Transit had $62 million in negative free cash flow.
  5. As of 30 September 2015, SBS Transit had $4.7 million in cash and equivalents and a sizable $525.4 million in debt. The bus and rail services provider has seen its balance sheet deteriorate from a year ago when it had $4.5 million in cash and equivalents and $458.3 million in debt.

In short, SBS Transit reported a quarter of solid revenue growth but saw its profits fall. There are more areas of concern. The transport outfit is still reporting negative free cash flow and holds a significant amount of debt. The balance sheet is also an area where investors need to watch.

Operational highlights

For the Bus segment, total revenue reported was $207.3 million, an increase of 4.9% year-on-year. Average daily ridership increased by 2% to 2.9 million passenger trips for the reporting quarter. The segment’s operating profit also increased by 24.1% year-on-year to $6.8 million.

Meanwhile, the Rail segment had experienced a 7.3% climb in revenue compared to a year ago. Quarterly revenue for the segment was $54.7 million. Unfortunately, the segment’s operating profit took a hit and more than halved to $1 million. Profit was crimped by higher staff costs arising from the ramp-up of Downtown Line Stage 2.

Looking forward, SBS Transit’s management team sees higher revenue growth from increases in ridership. On a more cautionary note, management also stated that the firm will continue to face challenges for both the Bus and Rail segments. Staff and financing costs are also expected to climb.

Foolish summary

At its closing price yesterday of $1.89, SBS Transit traded at around 35.3 times its trailing earnings and offers a dividend yield of around 1.4%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.