4 Stocks This Week (Transport) [29 Jun 2018] ComfortDelGro, SATS, SBS Transit, Singapore Airlines
This week, Obike announced its exit from the Singapore market, citing difficulties adhering to stricter bike-sharing regulations introduced by the Land Transport Authority (LTA). This sparked a public outcry on social media, with many Obike users unable to retrieve their initial deposits.
Singapore’s ride-sharing sector also made headlines this week, as Ryde filed a police report over phantom bookings and fake user accounts, claiming that one of the IP addresses linked to these fake accounts was owned by Grab.
All these happenings has drawn renewed attention on Singapore’s transport sector.
Concurrently, the West Texas Intermediate (WTI) crude oil prices closed at US$74.15 this week, reaching a 3.5-year high on concerns that sanctions on Iran could choke oil supplies. Despite higher oil prices, Singapore’s transport companies are expanding their operational capacities to meet rising demand.
Singapore’s Land Transport Authority projects that Singapore’s rising population and continued economic growth means more people and goods will need to be transported. For this week’s edition of 4 Stocks This Week, we will look at four of the largest SGX-listed companies in the transport sector.
ComfortDelGro Corporation Limited C52)
ComfortDelGro is Singapore’s largest taxi fleet operator, owning both Comfort Taxi and CityCab. Outside its taxi operations, ComfortDelGro also owns 74.59% of SBS Transit.
In February, it was reported that ComfortDelGro’s taxi fleet declined by 22% from its 2015 fleet size, largely due to the growth in private-hire vehicles.
However, with Uber’s departure from Singapore’s ride-hailing scene, ComfortDelGro announced that bookings through its app and call centre grew by 9% year-on-year in May 2018, the largest increase since September 2014.
Even though ComfortDelgro’s CEO Yang Ban Seng initially said in Feburary that it would not be buying any new taxis for the 2018 financial year, additional demand for taxi services arising from Uber’s departure prompted ComfortDelgro to place an order for 200 new taxis for the first time since December 2016.
On 21 June, American investment firm Blackrock announced that it bought an additional 717,500 shares, raising its stake in the company to 7%. Blackrock was already ComfortDelGro’s biggest shareholder.
ComfortDelGro’s share price has increased by 16.9% year-to-date. With a current market cap of $5.1 billion, ComfortDelGro closed at $2.35 per share this week.
SATS Ltd. (SGX: S58)
SATS is an integrated service provider of gateways services and food solutions.
At Singapore Changi Airport, SATS handles 80% of scheduled flights and serves about 50 of the scheduled 68 airlines out of Singapore. The company serves over 91 million passengers on over 651,000 flights annually.
For the fiscal year ended 31 March 2018, SATS reported that its operating profit declined by 1.8% year-on-year to $226.4 million. This was primarily because of lower revenue from its Food Solutions segment, which fell by 2.7% to $946.6 million. However, on the back of stronger cargo tonnage and more handled flights, SATS saw revenue from Gateway Services rise by 2.9% to $776.5 million.
In October 2017, SATS entered into a memorandum of agreement (MOA) with Turkish Airlines regarding the procurement of catering services at Istanbul New Airport. While negotiations are still ongoing, given that Istanbul New Airport is projected to welcome over 150 million passengers annually when fully completed, this is expected to be good news for SATS.
Despite this, SATS’s share price has fallen 4.8% year-to-date.
With a market cap of $5.6 billion, SATS closed at $5.00 per share this week.
SBS Transit Ltd (SGX: S61)
Ever since Singapore’s bus industry completed its transition to the Bus Contracting Model in 2016, SBS Transit has faced increased competition from newcomers Go-Ahead Singapore and Tower Transit Singapore. Despite this, SBS Transit remains Singapore’s largest bus operator.
SBS Transit announced that its net profit jumped by 64% to $16.8 million for Q1 2018, on the back of strong revenue growth from public transport services and higher other operating income.
It reported higher revenue from its bus services mostly due to higher fees earned under the Bus Contracting Model.
After Downtown Line 3 commenced operations on October 2017, average daily ridership of SBS Transit’s rail services has risen 21%, from 949,000 in September 2017 to 1.15 million in May 2018, which has resulted in higher revenue from rail services.
With higher profitability and SBS Transit’s policy of distributing at least half of its profits as dividends, its dividend per share has ballooned from $0.018 per share in 2013 to $0.076 per share in 2017. SBS Transit share price has increased by 4% year-to-date.
With a market cap of $810.2 million, SBS Transit closed at $2.60 per share this week.
Singapore Airlines Limited (SGX: C6L)
Singapore Airlines (SIA) provides passenger and air cargo transportation services worldwide. As Singapore’s national carrier, SIA also owns Scoot and SilkAir.
In May, Singapore Airlines announced that it would be introducing the world’s longest commercial flight between Singapore to Newark on 11 October. The company said this was commercially feasible because of fuel-efficient ultra long-haul aircraft and growing air traffic between Southeast Asia and North America.
In its annual report for the 2018 fiscal year ended 31 March 2018, SIA reported that its full-year net profit skyrocketed by 148% to $893 million. Even though its passenger yield fell by 3.1%, passenger traffic increased by 6.3%, resulting in passenger revenue rising by 3.6% or $428 million.
Moving forward, SIA says that it will continue its transformation programme for the next two years to expand on initiatives which enhance customer experience, promote revenue growth and bring about improvements in operational efficiency.
Despite the good news, SIA’s weaker performance in the 2017 fiscal year was reflected in CEO Goh Choon Phong’s renumeration, which fell by 14% to $4.32 million for the 2018 fiscal year.
With a current market cap of $12.8 billion, SIA closed at $10.69 per share this week.
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