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SMRT Corporation Ltd’s Latest Earnings: Moving Up

SMRT Corporation Ltd (SGX: S53) reported its fiscal third-quarter earnings yesterday evening for the fiscal year ending 31 March 2016 (FY2016). The reporting period was for 1 October 2015 to 31 December 2015.

The business of SMRT can be divided into seven different segments: Train operations, Light Rail Transit (LRT) operations, Bus operations, Taxi Operations, Rental, Advertising, and Engineering and Others. The first three are collectively referred to as the company’s Fare business. The rest are considered as the Non-fare business.

You can learn more about the transport company here or catch up with the results from the firm’s prior quarter here.

Financial highlights

The following’s a quick summary of the latest financial figures from SMRT Corporation:

  1. Quarterly revenue for the company rose by 4.6% year-on-year to $327.6 million. Sales growth was relatively broad-based.
  2. Net profit attributable to shareholders for the reporting quarter had spiked up by 63.5% year-on-year to $36.9 million.
  3. Consequently, earnings per share (EPS) for the reporting quarter increased markedly from 1.48 cents a year ago to 2.41 cents.
  4. For the reporting quarter, cash flow from operations was $63.3 million with capital expenditures clocking in at $77.1 million. Unfortunately, this puts SMRT Corporation in negative free cash flow territory to the tune of $13.8 million. There’s a bright spot here, however, as the company’s free cash flow had improved from a year ago when it was a negative $22.5 million.
  5. As of 31 December 2015, SMRT Corporation had $126.3 million in cash and equivalents and $810 million in debt, giving it a net debt position of $683.7 million. This is a slight deterioration from the net debt position of $661.7 million the transport operator recorded last year.

In summary, revenue had moved up for SMRT Corporation, while its profits had soared substantially. Unfortunately, the transport giant had fallen back into negative free cash flow territory, after recording positive free cash flow in the fiscal second quarter. Meanwhile, the firm still holds a sizable amount of debt on its balance sheet.

Operational highlights

SMRT Corporation’s top-line was up across the board, as mentioned earlier.

The company’s all important Fare business brought in $235 million in revenue for the quarter, up 5.4% from a year before. There was also positive news for its operating profit. The bus operation swung back into positive operating profit-territory for the reporting quarter, sending the Fare business’s operating profit up six-fold compared to a year ago.

The Non-Fare business had lagged slightly with sales growth of 2.6% year-on-year. Operating profit, though, rose strongly by 20.3% year-on-year.

SMRT Corporation also sold 110 buses to the Land Transport Authority and paid down a sliver of its fixed rate loans. Notably, the company revealed that there had been progress in discussions with the authorities on the new rail financing framework.

Desmond Kuek, the chief executive of SMRT Corporation, had given the following comments in the earnings release on the company’s outlook:

“We continue our steady performance in our Non-Rail businesses but the Rail business remains challenging due to higher operating costs associated with improving rail reliability.

We are focused on our multi-year programmes to renew and upgrade the ageing rail network. While there is more to be done in reducing major train disruptions, we are encouraged that our consistent efforts in enhancing the reliability of the network have seen results. As a key reliability indicator, service delays longer than 5 minutes for every 100,000 kilometres improved from 1.80 in 2011 to 0.71 in 2015, the best performance achieved on the North-South and East-West lines in the past decade.”

Looking forward, the management team also sees further increases in operating expenses due to maintenance and renewal programmes for the rail network.

Foolish summary

At its closing price yesterday of $1.38, SMRT Corporation traded at 24 times trailing earnings and has a dividend yield of around 2.4% (thanks to its annual dividend of S$0.0325 per share for FY2015).

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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.