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

SBS Transit Ltd (SGX: S61) reported its third-quarter earnings yesterday. The reporting period was for 1 July 2016 to 30 September 2016.

As a quick background, SBS Transit is a subsidiary of land transport giant Comfortdelgro Corporation Ltd (SGX: C52). Singaporeans may recognize SBS Transit’s namesake buses and the North East and Downtown MRT lines that it operates. It may not be a surprise to know that the company has two business segments, namely Bus and Rail.

You can learn more about SBS Transit in here and here. You can also look up the results from its previous quarter here.

Financial highlights

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

  1. Quarterly revenue for SBS Transit rose by 4.8% year-on-year to $274.7 million.
  2. Net profit attributable to shareholders climbed 43.2% year-on-year to $7.8 million. The transport company benefited from lower fuel and electricity costs, lower depreciation costs, and lower finance costs.
  3. Earnings per share (EPS) increased 42% from 1.77 cents in the third-quarter of 2015 to 2.52 cents in the reporting quarter.
  4. For 2016’s third-quarter, cash flow from operations was a negative $53.3 million with capital expenditures coming in at $2.6 million. This puts SBS Transit in negative free cash flow territory to the tune of almost $56 million; this is down from the negative free cash flow of $28.5 million seen a year ago ($5.93 million in cash flow from operations and $34.4 million in capex).
  5. As of 30 September 2016, SBS Transit has $4.7 million in cash and equivalents and a sizable $297.5 million in debt. The bus and rail services provider has seen its balance sheet improve compared to a year ago, when it had $4.7 million in cash and equivalents and $525.2 million in debt.

In sum, SBS Transit reported another solid quarter of revenue and profit growth. The transport company also reduced its debt levels compared a year ago. But, SBS Transit had generated negative free cash flow.

Operational highlights

For the Bus segment, total revenue reported was $205.6 million, a decrease of 0.8% year-on-year. But, the segment’s operating profit soared by 35.1% year-on-year to $9.2 million.

Meanwhile, the Rail segment registered a healthy 26.3% increase in revenue to $69.1 million. The segment’s operating profit, however, was only $0.8 million, down over 21% from a year ago.

SBS Transit’s management added this snippet in the earnings release on the company’s future:

“Rail ridership is expected to be higher with higher ridership from DTL 2. However, fare revenue will be affected by the 4.2% fare reduction effective 30 December 2016 as announced by the Public Transport Council.

The Bus business has commenced operations under the Negotiated Contract with LTA under the Bus Contracting Model with effect from 1 September 2016. Bus revenue is expected to be maintained.

With the recent salary adjustments announced in June 2016, staff costs are expected to be higher. For the DTL, we will continue to build up the staff strength in preparation for DTL 3. Repairs and maintenance costs are also expected to be higher as more such works are carried out in the Rail segment.”

At its closing share price of $2.21 yesterday, SBS Transit traded at around 29 times trailing earnings with a dividend yield of around 1.5%.

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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.