4 Quick Things Investors Should Learn About SBS Transit Ltd

SBS Transit Ltd (SGX: S61) is a recognisable company for many in Singapore.

For one, it’s hard to miss the company’s fleet of public buses that ply the roads of our Garden City daily. As a brief background, SBS Transit also operates the North East Line and Downtown Line MRT (mass rapid transit) rail services here along with the Sengkang and Punggol LRT (light rail transit) systems.

SBS Transit’s latest annual report was released only a few months ago. I had looked through it and picked out four quick things that investors might want to know.

1. SBS Transit’s roots can traced back to 1973

In the report, chairman Lim Jit Poh paid tribute to the late Lee Kuan Yew’s role in the formation of the Singapore Bus Service company. Prior to the Singapore Bus Service, which was the predecessor of SBS Transit, bus services in Singapore were haphazard, unsafe, and unruly.

Lim also noted that Lee’s government had a huge role to play in the construction of Singapore’s first MRT system. Lim said that the government had concluded back then that an all-bus system would be inadequate to support the transportation needs of the nation.

The longevity of the business can be seen as a sign of SBS Transit’s importance to Singapore’s transport system.

2. SBS Transit’s buses ferried over a billion passengers in 2015         

Today, SBS Transit is Singapore’s largest scheduled bus service operator with a fleet of over 3,600 buses. SBS transit operates 261 bus routes in total. In 2015, SBS Transit’s fleet of buses ferried a total of 1.03 billion passengers, which works to over 2.8 million passengers per day. On top of this, SBS Transit’s rail services transported almost 260 million passengers in 2015.

For a country with a population of around 5.5 million, these are significant figures.

3. The Government Bus Contracting Model will have an impact

Changes are coming for Singapore’s public bus system. Under the new government bus contracting model, the Singapore government will own bus infrastructure such as depots, buses, and fleet management systems. Bus operators such as SBS Transit will be contracted and paid to operate bus services while the Singapore government retains fare revenue.

To facilitate the transition, all existing bus routes have been bundled into 12 bus packages. The incumbents, SBS Transit and SMRT Corporation Ltd (SGX: S53), will negotiate and retain nine of the packages on offer. Three packages, though, will be tendered out.

The first two packages have been won by British transport operators Tower Transit and Go-Ahead Group. Unfortunately, the two packages contained 42 services (out of a total of 51) that SBS Transit is currently operating. This will likely have an impact on SBS Transit.

4. A roller coaster ride

SBS Transit has endured a roller coaster ride since 2011.

Revenue has grown from around $751 million in 2011 to $1.024 billion in 2015. But its earnings per share (EPS) has lagged in a big way. SBS Transit’s EPS has dipped from 11.9 cents in 2011 to just 3.6 cents in 2013. The company’s EPS has since recovered to 5.4 cents in 2015, but still sits more than 50% below its 2011 level.

The same applies to its dividends. SBS Transit’s dividend per share was 5.9 cents in 2011 but fell to as low as 1.8 cents in 2013. The dividend has recovered to 2.7 cents in 2015, but still sits at less than 50% of where it was in 2011.

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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 company mentioned.