SBS Transit Ltd’s 2018 Second-Quarter Earnings: Interim Dividend Hiked By Around 60%
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).
On Wednesday (8 August), the company announced its financial results for the three months ended 30 June 2018.
Revenue for the quarter grew 19.8% year-on-year to S$344.9 million. The company said that revenue from the Public Transport Services segment (consisting of its bus and rail operations) improved by 20.3% year-on-year to S$330.1 million.
The increase was primarily due to higher fees from higher operated mileage following the commencement of the Seletar bus package in March this year. Higher rail ridership with the launch of Downtown Line (DTL) 3 in October 2017 also contributed to the top line. The positive factors were offset partially by lower average rail fares due to a fare reduction that started in December 2017.
Despite rail ridership growth in all the lines it operates in, SBS Transit’s rail operations still made a loss in 2018’s second-quarter. The company’s fare revenue was not enough to cover increasing operating and maintenance costs.
The Other Commercial Services segment (comprising SBS Transit’s rental and advertising businesses) saw revenue growth of 10.7% to S$14.8 million due to higher advertising revenue from the commencement of DTL 3. As a result, operating profit went up by 10.9% to S$9.9 million.
Net profit attributable to shareholders surged 52.9% to S$19.4 million. Consequently, earnings per share (EPS) for the quarter rose 52.6% from 4.09 cents to 6.24 cents.
As of 30 June 2018, the balance sheet had S$6.5 million in cash and bank balances, and S$156.5 million in total debt. This translates to a net debt position S$150.0 million, an improvement compared to both 2018’s first-quarter and 2017’s second-quarter.
Quarterly operating cash flow jumped 58.8% from S$35.8 million a year ago to S$56.9 million. With capital expenditure increasing slightly from S$3.2 million to S$4.2 million, SBS Transit’s free cash flow jumped by 61.5% from S$32.6 million to S$52.7 million.
An interim dividend of 5.80 Singapore cents per share was declared, up by 58.9% from 3.65 Singapore cents per share a year ago.
Going forward, SBS Transit said that revenue from its Public Transport Services business is expected to increase, while revenue from the Other Commercial Services segment is likely to be maintained. However, it also mentioned:
“Operating costs will be higher with higher staff costs following salary adjustments and increments. Repairs and maintenance costs are expected to increase with DTL fully operational and higher maintenance requirements as the bus and train fleets age. Premises costs are also expected to be higher with the addition of Seletar and Ulu Pandan Depots.”
At Wednesday’s closing price of S$2.53, SBS Transit is selling at 13 times trailing earnings and has a trailing dividend yield of 3.9%.