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

Yesterday, SBS Transit Ltd (SGX: S61) announced its financial results for the first quarter ended 31 March 2018. Here are 10 things investors should know from the earnings announcement:

1. Revenue for the 2018 first-quarter soared 15.8% to S$328.2 million.

2. SBS Transit said that revenue from Public Transport Services (consisting of bus and rail operations) improved by 16.3% year-on-year to S$313.3 million. The rise was mostly due to higher fees earned under the Bus Contracting Model with higher operated mileage, higher ridership from rail services with the commencement of Downtown Line (DTL) 3 from the end of October 2017, and higher other operating income. This was offset partially by lower average rail fare due to the fare reduction since the tail-end of last year.

3. Other operating income rose mainly on the back of “one-off recovery of Seletar pre-operation costs and income from the provision of shuttle services”.

4. The average daily ridership for all the rail networks operated by the firm grew year-on-year, with the most significant growth coming from the DTL. The average daily ridership for the line ballooned by 75.8% to 431,000 passenger trips due to the opening of DTL 3.

5. The commencement of DTL 3 also helped improved revenue from Other Commercial Services (SBS Transit’s rental and advertising businesses), which rose 6.6% to S$14.9 million. Revenue from this segment went up mainly due to higher advertising revenue from the newest line.

6. Net profit attributable to shareholders surged 63.7% to S$16.8 million. Consequently, diluted earnings per share (EPS) for the quarter rose to 5.38 Singapore cents, up from 3.30 cents a year ago.

7. Net profit margin improved from 3.6% last year to 5.1% in the latest quarter.

8. The balance sheet carried S$6.0 million in cash and bank balances, and S$197.0 million in total debt, as of 31 March 2018. This translates to a net debt position S$191.0 million, a decline as compared to the end of last year (S$5.3 million in cash hoard and total borrowings of S$181.0 million, giving a net cash position of S$175.7 million).

9. Operating cash flow improved for the quarter, which came in at a negative S$37.6 million as compared to a negative S$51.6 million last year. With capital expenditure decreasing from S$7.8 million last year to S$4.2 million in the latest quarter, SBS Transit’s free cash flow improved from a negative S$59.3 million to a negative S$41.8 million.

10. In its outlook statement, the land transport outfit said that revenue from the Public Transport Services is expected to be higher while revenue from Other Commercial Services is likely to be maintained. Of the Public Transport Services revenue, bus service revenue should grow due to the commencement of the Seletar bus package from 11 March 2018. The Bukit Merah bus package, which SBS Transit won in February this year, which will start operations in the fourth quarter of 2018. As for the rail services, revenue is expected to grow due to a full-year revenue contribution from DTL 3. However, the fare reduction, with effect from December 2017, could partially offset the higher revenue from DTL 3. SBS Transit also added that operating costs would rise due to higher staff costs.

At yesterday’s closing price of S$2.58, SBS Transit is going at close to 15 times its trailing earnings and has a trailing dividend yield of 2.9%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of SBS Transit Ltd. Motley Fool Singapore contributor Sudhan P owns shares in SBS Transit Ltd.