SBS Transit Ltd’s Latest Earnings: A Year of Recovery

Yesterday, SBS Transit Ltd (SGX: S61) reported its full year earnings for 2016.

As a quick background, SBS Transit operates public bus and rail services in Singapore. It recently changed how it segments its business and now has two categories: Public Transport Services (the bus and rail services) and Other Commercial Services (advertising and rental income). SBS Transit is a subsidiary of the local land transport giant ComfortDelGro Corporation Ltd (SGX: C52).

You can look up the results from SBS Transit’s previous quarter here.

Financial highlights

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

  1. Revenue in 2016 rose 7.3% to $1.10 billion.
  2. Net profit attributable to shareholders soared 87.6% to $31.4 million. The transport company benefited from lower fuel and electricity costs, lower depreciation cost, and lower finance costs.
  3. Earnings per share (EPS) spiked 86% from 5.41 cents in 2015 to 10.12 cents in 2016.
  4. For the full year, cash flow from operations was $64.9 million with capital expenditures coming in at $23.4 million. This puts SBS Transit in positive free cash flow territory to the tune of almost $41.5 million. It is also a big jump from 2015’s negative free cash flow of $154.2 million.
  5. As of 31 December 2016, SBS Transit had $4.3 million in cash and equivalents and a sizable $216 million in total debt. But, the bus and rail services provider has seen its balance sheet improve compared to the end of 2015, when it had $4.4 million in cash and equivalents and $337.5 million in debt.

To sum up SBS Transit’s 2016, the company’s profit has recovered to a level not seen since 2011. While the company has seen its bottom-line climb from 2012 onwards, the profit recovery in 2016 is noteworthy.

The transport company also reduced its debt position compared to the end of 2015 and generated positive free cash flow.

The board of directors proposed a final dividend of 2.7 cents, bringing the tally for 2016’s dividend to 5.05 cents. This is a huge improvement from 2015 when SBS Transit paid out 2.7 cents per share in dividend.

Operational highlights

For the Public Transport Services business, total revenue in 2016 was $1.03 billion, an increase from the $962.7 million reported last year. The segment’s operating profit went from a loss of $12.8 million in 2015 to a profit of $2.7 million in 2016.

Meanwhile, the Other Commercial Services segment registered a 4.4% increase in sales to $64 million in 2016. Operating profit for the year was $39.1 million, up slightly from around $38 million in 2015.

Future outlook

The new Bus Contracting Model (BCM) that commenced in September 2016 played a role in SBS Transit’s improvement. Management had the following comments in the earnings release regarding the company’s outlook:

“Revenue from Public Transport Services is expected to be higher. Bus service revenue is expected to be higher this year with a full year contribution of revenue under the BCM compared to four months’ contribution in 2016. Rail service revenue is expected to be higher with higher ridership although this will be affected by the 4.2% fare reduction effective 30 December 2016.

Revenue from Other Commercial Services is expected to be maintained.”

So, the company expects some revenue growth in 2017. But, management also warned:

“Operating costs will be higher with higher staff costs following the salary adjustments in June 2016 and the continued build-up of staff strength in preparation for DTL 3. Repairs and maintenance costs are also expected to be higher as more such works are carried out.”

At their closing price of $2.30 each yesterday, SBS Transit’s shares trade at around 22.7 times trailing earnings and offer a dividend yield of around 2.2%.

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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.