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What Investors Should Know About SBS Transit Ltd’s 2018 Third-Quarter Earnings

SBS Transit Ltd (SGX: S61) provides bus and rail services in Singapore. Under the rail services business, SBS Transit operates the North East Line (NEL), the Downtown Line (DTL), and the Sengkang and Punggol Light Rapid Transit (SPLRT).

Yesterday, SBS Transit announced its financial results for the third quarter ended 30 September 2018.

Financial highlights 

Here are some of the key financial highlights from the latest quarter:

1) Revenue grew 19.1% year-on-year to S$351.4 million.

2) Total operating costs went up 16.5% to S$327.4 million.

3) As a result, operating profit swelled 70.9%, from S$14.0 million to S$24.0 million.

4) Profit attributable to shareholders surged 77.5% to S$19.7 million.

5) Consequently, earnings per share improved from 3.57 cents to 6.33 cents, up 77.3%.

6) As of 30 September 2018, SBS Transit’s balance sheet had S$8.1 million in cash and bank balances, and S$131.5 million in total debt. This translates to a net debt position S$123.4 million, an improvement from S$175.7 million in net debt at the end of 2017.

7) Operating cash flow, however, fell 18.7%, from S$62.1 million a year ago to S$50.5 million. With capital expenditure decreasing from S$11.0 million to S$5.0 million, SBS Transit’s free cash flow declined by 11.0%, from S$51.1 million to S$45.5 million.

The increased top-line for the 2018 third-quarter was due to higher revenue from the Public Transport Services division, which was partially offset by lower revenue from the Other Commercial Services division.

Revenue from the Public Transport Services division increased by 20.5% to S$337.9 million mainly due to higher fees received with better operated mileage following the commencement of the Seletar Bus Package in March 2018, and higher ridership from rail services with the opening of DTL 3 in October 2017. Meanwhile, Other Commercial Services division’s revenue decreased by 7.7% to S$13.4 million mainly on the back of lower advertising revenue.

Outlook

Going forward, SBS Transit said that revenue from its Public Transport Services business is expected to grow, while revenue from the Other Commercial Services segment is likely to be maintained. However, it also commented:

“[O]perating costs will increase with higher staff costs following salary adjustments and increments to retain and attract staff, and higher training investments for staff skill development and advancement. Repairs and maintenance costs are expected to increase with DTL fully operational and higher maintenance requirements for the ageing bus fleet and the NEL/SPLRT fleet in its mid life cycle, and investments in predictive maintenance capabilities. Premises costs are higher with the full year effect of DTL 3 stations and the additions of Seletar and Ulu Pandan Bus Depots.”

Using Thursday’s closing price of S$2.63, SBS Transit has a trailing price-to-earnings ratio of 12 and a dividend yield of 3.7%.

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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.