SBS Transit Ltd’s Latest Earnings: Higher Profits Seen for the Year

SBS Transit Ltd (SGX: S61) released its results for the year ended 31 December 2015 yesterday.

SBS Transit, as many know, is an operator of bus and rail services in Singapore. It is a subsidiary of ComfortDelGro Corporation Limited  (SGX: C52), which also happens to be the world’s second-largest land transport company. SBS Transit’s locally-listed competitor is SMRT Corporation Ltd  (SGX: S53). You can read up on SMRT’s latest earnings here.

With the above as a background, let’s take a quick look at SBS Transit’s latest earnings.

Financial highlights

  1. Total revenue for the year came in at S$1.02 billion, up 7.7% from a year ago. This was due to higher revenue from both the Bus segment and the Rail segment.
  2. Meanwhile, net profit climbed 17% from S$14.3 million in 2014 to S$16.7 million. Higher operating profit had helped with the bottom-line growth.
  3. Consequently, earnings per share for the latest period clocked in at 5.41 Singapore cents, as compared to 4.62 cents at the end of last year.
  4. As of 31 December 2015, the transport outfit had S$4.4 million in cash and equivalents, with S$337.5 million in total debt. This is a major improvement from a year ago, when the cash balance was at S$5 million while total borrowings was at S$482.5 million.
  5. Cash flow from operations and capital expenditures for the year came in at S$1.6 million and S$155.8 million respectively. This gave SBS Transit negative free cash flow of around S$154 million. A year ago, the firm had generated negative free cash flow of S$181.1 million (S$33.3 million in cash flow from operations and S$214.4 million in capital expenditures).

Business highlights

Revenue from the Bus segment was at S$810.5 million, which was 7.5% higher year on year, while revenue from the Rail segment was at S$213.4 million, an increase of 8.3% year on year. The better performances were largely off the back of increases in average daily ridership and the average fare.

SBS Transit’s profitability for the year seems to be slightly helped by lower oil prices. Fuel and electricity costs had decreased by 5.5% year-on-year to S$174 million.

Proceeds from the disposal of buses from the Bus Service Enhancement Programme (BSEP) were used to repay loans and had thus helped lower SBS Transit’s gearing ratio. Its gross gearing ratio was at 99.7%, as of 31 December 2015, as compared to 155.6%, exactly a year ago.

Looking ahead

The company said that, going forward, revenue is expected to be higher with increased ridership, mainly due to the opening of the Downtown Line (DTL) Stage 2 in Singapore’s MRT network in end December 2015.

But, SBS Transit also warned that the Bus and Rail businesses will continue to face challenges. Employee costs are expected to be higher with increased headcount for the BSEP and DTL Stage 2. Operating expenses for the Rail segment is also set to go up further as “more repairs and maintenance are expected to be carried out.”

SBS Transit’s shareholders will receive a final dividend of 1.05 Singapore cents for the fourth quarter. Including the 1.65 cents already paid out in the second quarter, the total dividend for the year will come to 2.7 cents. For 2014, the firm had paid a final dividend of 1.05 cents and an interim dividend of 1.25 cents, bringing the total for that year to 2.3 cents.

The company closed at S$1.99 on Friday. It is now valued at 37 times trailing earnings and sports a trailing dividend yield of 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 Sudhan P doesn’t own shares in any companies mentioned.