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

SBS Transit Ltd (SGX: S61) released its second-quarter earnings yesterday. The reporting period was for 1 April 2016 to 30 June 2016.

As a quick background, SBS Transit is a subsidiary of local land transport giant Comfortdelgro Corporation Ltd (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 SBS Transit 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 results from the company’s previous quarter here.

Financial highlights

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

  1. Quarterly revenue rose 5.6% year-on-year to $269 million.
  2. Net profit attributable to shareholders managed to rise by 19% year-on-year to $7.2 million. The transport company benefited from lower fuel and electricity costs, lower depreciation cost, and lower finance costs.
  3. Earnings per share (EPS) consequently increased 19% from 1.97 cents in the second-quarter of 2015 to 2.34 cents in the reporting quarter.
  4. For 2016’s second-quarter, cash flow from operations was $1.36 million with capital expenditure clocking in at $5.78 million. This puts SBS Transit in negative free cash flow territory to the tune of $4.4 million, a significant improvement from the negative $20.8 million seen a year ago ($23.9 million in cash flow from operations and $44.7 million in capex).
  5. As of 30 June 2016, SBS Transit had $4.7 million in cash and equivalents and a sizable $258 million in debt. The bus and rail services provider has seen its balance sheet improve compared to the end of last year, when it had $4.4 million in cash and equivalents and $337.5 million in debt.

In short, SBS Transit reported a solid quarter of revenue and profit growth. The transport company also reduced its debt position substantially over the last six months. But, the company had generated negative free cash flow.

The board of directors proposed an interim dividend per share of 2.35 cents, up from 1.65 cents a year ago.

Operational highlights and the road ahead

For the Bus segment, total revenue reported was $203.9 million, an increase of 0.6% year-on-year. Average daily ridership increased by 2.1% to 2.9 million passenger trips for the reporting quarter. The segment’s operating profit soared by 25.5% year-on-year to $7.5 million.

Meanwhile, the Rail segment registered a healthy 24.6% year-on-year growth in revenue to $65.1 million. But, the segment’s operating profit was only $0.2 million, down significantly from a year ago. This was due to staff build-up in anticipation for Downtown Line (DTL) 3.

Looking forward, SBS Transit’s management team sees higher rail revenue and stable bus revenue. Separately, SBS Transit announced that it has entered into a contract with the LTA (Land Transport Authority) under the new Bus Contracting Model (BCM).

The management added this snippet on the BCM:

“Under the BCM, the Bus revenue will comprise service fee for the provision of bus services and revenue from advertising and rental. In addition, LTA will pay the Company a leasing fee for the use of its existing fleet of buses based on the depreciation of the buses over the statutory lifespan.”

At its closing price yesterday of $2.29, SBS Transit traded at around 40 times trailing earnings with a dividend yield of around 1.5%.

To learn more about Foolish investing and to keep up to date on the latest financial and stock market news, sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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.