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5 Quick Things Investors Should Learn About SMRT Corporation Ltd From Its Management

SMRT Corporation Ltd  (SGX: S53) reported its fiscal first-quarter earnings earlier this month. The earnings report included a speech from the company’s chief executive, Desmond Kuek, and chief financial officer, Manfred Seah.

I picked out five useful things from the speech that investors might want to know about.

But first, here’s a quick background on the company for better context later. The business of SMRT can be divided into eight different segments – Train operations, Light Rail Transit (LRT) operations, Bus operations, Taxi operations, Rental, Advertising, Engineering Services, and Others. The first two are collectively referred to as the Rail business. The rest are considered Non-Rail businesses.

With that, here are my notes from the recent speech:

  1. Kuek made a couple of key points in his address. First, SMRT had endured a weak first-quarter, recording a loss in the Rail business and clocking lower profit in the Non-rail businesses. The second key point was about the New Rail Financing Framework (NRFF) and Temasek’s privatization proposal. Kuek said that a privatization of SMRT will allow the company to fulfill its role as a public transport operator.
  2. Next, Seah gave a rundown on SMRT’s financial figures and shared some key indicators. Among the indicators, Seah said that the EBIT (earnings before interest and taxes) and PAT (profit after tax) margins were lower for the quarter, ending at 7.0% and 4.9% respectively. ROE (return on equity) was also lackluster at 6.7%.
  3. Seah also reported that SMRT had total borrowings of $755.5 million, of which $750 million is non-current (meaning to say this $750 million is not due by 30 June 2017). Another key indicator, the net gearing ratio, rose from 64% in the previous sequential quarter to 67%.
  4. Rail revenue was down 2.0% year-on-year while bus revenue fell by 4.4%. In both cases, Seah cited lower average fare and the cannibalization impact of DTL2 (Downtown Line 2). DTL2 is operated by SBS Transit Ltd (SGX: S61). Another weak area for SMRT was taxi revenue, which fell 7.0% year-on-year. SMRT cited a smaller hired-out fleet as the reason for the fall.
  5. Seah also talked in length about the NRFF and the different scenarios that SMRT had considered. You can read more about it right here.

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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.