The Week Ahead: Singtel, SIA and ComfortDelGro
- Original Post from The Motley Fool Sg

It’s a big week for Singapore’s transportation sector with numbers from a port operator, an airport services outfit and a cab firm.


Hutchison Port Holdings (SGX: NS8U) posted a slump in third-quarter profits in October. Revenue fell nearly 7% because of weaker within Asia. The Hong Kong-based port operator said it will continue to focus on improving costs given the soft global trade outlook.


Airport services company, SATS (SGX: S58), reported a 9% drop in second-quarter earnings because of the absence of a one-time gain a year ago. But SATS said revenues was 4.2% higher, with gateway services up 6.3% and food solutions up 2.5%.


ComfortDelGro (SGX:C52) said third-quarter profits were down 2%. But revenues improved 8.5% with increased revenues from its existing business and contributions from new acquisitions.


Singapore’s biggest telecom operator, Singapore Telecommunications (SGX: Z74), said profits sunk in the second-quarter because of negative currency movements and lower contributions from Airtel and Telkomsel.


Singapore Airlines (SGX: C6L) was adversely affected by higher fuel costs in the second quarter. Profits sank 81%, even though sales rose 5.6%.


On the economic front, US headline inflation could have moderated from 1.9% in December to 1.6% in January. In December, my monthly consumer prices fell for the first time in nine months because of a slump in petrol prices.


China’s inflation rate could have edged up to 2% in January, after falling back to a six-month Low in December. The slowdown in inflation was due to a drop in non-food prices.


Meanwhile, the country’s balance of trade with the rest of the world could have narrowed to $35 billion on lower a drop in exports and an even bigger fall in imports.


Japan is expected to say that its economy grew at an annualised rate of 1.4% in the fourth quarter of 2018. That would be a sharp reversal of a 2.5% contraction in the previous quarter.


Malaysia will also report GDP numbers for the final three months of 2018. The economy could have expanded from 4.4% in the previous quarter to 4.6%.


And finally, Singapore will report retail sales for December. In November, they fell 3% on a slump in sales of computer and telecom equipment. It would be unusual not to see an uplift in a festivity-driven December number.


The Motley Fool’s purpose is to help the world invest, better. Click here nowfor your FREE subscription to Take Stock - Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock - Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


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Singapore Airlines’ Latest Earnings: Fuel Costs Hit Profits
- Original Post from The Motley Fool Sg

Singapore Airlines Ltd (SGX: C6L), the national carrier of Singapore, reported a downbeat set of earnings yesterday for the full fiscal year ending 31 March 2019 (2018/2019). Here are some of the key financial highlights from its latest full-year results:


1) Revenue grew 3.27% year-on-year to S$16.3 billion.


2) Total operating costs increased by 7.0% to S$15.3 billion.


3) As a result, operating profit declined by 31.1% to S$1.07 billion.


4) Profit attributable to shareholders followed suit, dropping by 47.5%, from S$1.30 billion to S$682.7 million.


5) Similarly, earnings per share plunged by 47.6% from 110.1 cents to 57.7 cents.


6) As of 31 March 2019, SIA’s balance sheet had S$2.94 billion in cash and bank balances, and S$6.65 billion in total debt. This translates to a net debt position of S$3.71 billion. This was a major step back from the S$559 million in net debt that SIA reported on 31 March 2018.


7) Operating cash flow rose by 7.3% year-on-year, from S$2.61 billion to S$2.80 billion. Capital expenditure, on the other hand, remained rather stable increasing by 6.8% from S$5.21 billion to S$5.56 billion. This resulted in SIA’s free cash flow dropping by 6.2%, from negative S$2.6 billion to negative S$2.76 billion.


8) SIA declared a final dividend of 22 cents per share, bringing its total dividend to 30 cents for the fiscal year.


Revenue increased on the back of growth in passenger traffic and cargo was flown revenue.Looking at the breakdown of operating profits according to different segments in the group, the biggest decline in operating profits was seen at its budget carrier Scoot, which reported negative operating profits. This was due to expansion costs which outweighed revenue growth and a slowdown in the rate of growth of Chinese travel.


Outlook


Singapore Airlines commented on its outlook:


“Growth in forward passenger bookings in the months ahead is tracking positively against capacity injection, with robust premium cabin demand. Most key markets, including those that have seen significant capacity growth such as the US, Japan, Indonesia, and New Zealand, continue to grow at a healthy pace. However, China’s international traffic growth rates have softened, at a time of increased supply in the market.


Notwithstanding the current demand picture, ongoing trade disputes and slowing economic growth in key markets pose uncertainty to the operating environment. Efforts will be made to capture opportunities and mitigate any arising weaknesses in both cargo and passenger segments.


Fuel cost headwinds may persist on supply risks in the oil market. However, the SIA Group’s significant fuel hedges should help to mitigate the effect of higher fuel prices. For the financial year 2019/20, the Group has hedged 64% of its fuel requirement in MOPS and 5% in Brent at weighted average prices of USD76 and USD53 per barrel, respectively. Longer-dated Brent hedges with maturities extending to the financial year 2024/25 cover up to 46% of the Group’s projected annual fuel consumption, at average prices ranging from USD58 to USD63 per barrel.


SIA’s Transformation program continues to progress well, resulting in revenue growth, and improvements to operational efficiency and organizational structure. The Airline’s digital transformation is also making good progress, with significant investments in support of an ambition to be the world’s leading digital airline. At the same time, new industry-leading products and services continue to be rolled out on more routes, as new fuel-efficient aircraft enter the fleet. With these and other initiatives, the Group is well positioned to navigate through ongoing challenges in the operating environment.”


SIA’s closing price on Thursday stood at S$9.40 per share, resulting in a price-to-earnings ratio of 16.3 and a dividend yield of 3.2%.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


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Motley Fool writer Esjay contributed to this article. Esjay does not own shares in Singapore Airlines.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Tim Phillips does not own shares in any of the companies mentioned.


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ComfortDelGro’s Latest Earnings: Strong Start to the Year
- Original Post from The Motley Fool Sg

ComfortDelGro Corporation Ltd (SGX: C52) is a Singapore-based land transportation conglomerate with business interests in the bus, taxi and rail services. Apart from Singapore, it has a presence in six other countries, namely, China, the UK, Australia, Malaysia, Ireland, and Vietnam.


ComfortDelGro announced its financial results for the first quarter ending 31 March 2019, yesterday. Let’s have a quick look to see how it did.


Financial highlights


Here are some of the key financial highlights from the latest full-year results:


1) Revenue grew 7.8% year-on-year to S$947.3 million. The increase in revenue was on the back of strong contributions from new acquisitions which accounted for close to 80% of the increase in revenue.


2) Total operating costs followed suit increased by 7.3% to S$839.9 million. The increase in operating cost was due to staff costs associated with the new acquisitions.


3) As a result, operating profit rose by 12.2% to S$107.4 million.


4) Profit attributable to shareholders saw a 6.2% rise, from S$66.3 million to S$70.4 million.


5) Consequently, earnings per share moved from 3.06 cents to 3.25 cents, up 6.2%.


6) As of 31 December 2018, ComfortDelGro’s balance sheet had S$586.1 million in cash and bank balances, and S$569.9 million in total debt. This translates to a net cash position of S$16.2 million. This is lower year-on-year when compared to 2017 when ComfortDelGro reported a net cash position of S$273.9 million.


7) Operating cash flow, improved by 49.1%, from S$64.1 million a year ago to S$95.6 million. Capital expenditure, on the other hand, increased from S$37.7 million to S$95.2 million. This resulted in ComfortDelGro’s free cash flow dropping sharply by 98.5%, from S$26.4 million S$0.4 million.


Outlook


ComfortDelGro Managing Director/Group CEO, Mr. Yang Ban Seng, commented,


“The robust first quarter’s results show growth from the new acquisitions as well as existing businesses. The acquisitions we made in the last year have started to reap returns and we expect that they will continue to do so. We will continue to grow our core businesses, look at investment opportunities and explore new areas for growth, particularly in those that leverage technology and strengthen our core expertise.”


ComfortDelGro’s share price ended trading on Tuesday at S$2.57, resulting in a price-to-earnings ratio of 18.4 and a dividend yield of 4.1%.


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Motley Fool writer Esjay contributed to this article. Esjay does not own shares in Comfortdelgro.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Tim Phillips doesn’t own shares in any companies mentioned.


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The Week Ahead: Singtel, SATS And Singapore Airlines
- Original Post from The Motley Fool Sg

So, now we know. US importers that bring Chinese-made goods into America must pay a tariff of 25% on some US$200 billion worth of items,rather than just 10%. China is unlikely to take this lying down. It has threatened to retaliate. We wait with bated breath.


Staying in America, retail sales for April could provide some clues to the impact of higher import prices on consumer spending. They are expected to show a sharp drop in growth from the previous month.


But retail sales growth in China in April could be almost unchanged from the previous month at 8.7%. Malaysia will report retail sales for March. It is expected to have grown 7.7% from a year ago, which would be slower than the 8.5% in February. Malaysia is also expected to say that the economy grew at an annualised rate of 4.5% in the first quarter.


The annual rate of inflation in the eurozone could have moderated to just 0.7% in April. Meanwhile, the second estimate of economic growth is expected to confirm that the economic bloc expanded 1.2%.


India, which is at the tail end of a general election, is expected to say that the rate of inflation for April was marginally higher at 2.97%. In March, the retail prices inflation rate climbed to a five-month high of 2.86%.


And just as India’s election draws to a close, Australia will hold its federal election on 18 May. It is essentially a battle between the incumbent Liberal party led by Scott Morrison and the centre left Labor Party, headed by former union leader Bill Shorten.


On the earnings front, investors will be hoping that Singtel (SGZ: Z74) can break five straight quarters of falling profits. In February, the telecom operator said net profits fell 14.2% in the third quarter.


In February, Singapore Airlines (SGX: C6L) reported a 27% drop in third-quarter income. But group revenue rose 7%, despite flat average ticket prices.


Meanwhile, SATS (SGX: S58) said profit rose 3.5% in the third quarter thanks to improvements in both food solutions and gateway services. It said it plans to build new central kitchens in China to supply fast casual restaurants in key cities.


There are also results from Golden Agri-Resources (SGX: E5H), ComfortDelGro (SGX: C52), Singapore Technologies Engineering (SGX: S63). City Developments (SGX: C09) and Sembcorp Industries (SGX: U96) are also pencilled in for numbers.


The Motley Fool’s purpose is to help the world invest, better. Click here nowfor your FREE subscription to Take Stock - Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock - Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


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Should You Invest in Singapore Airlines Ltd’s Latest 5-year Bonds?
- Original Post from The Motley Fool Sg

Last week, Singapore Airlines Ltd (SGX:C6L) announced that it will be issuing S$500 million worth of bonds with an annual interest rate of 3.03%. The bonds will mature in 2024. Of the S$500 million sum, S$300 million will be issued to the general public while the rest will go to institutional investors. Further, if the bond is oversubscribed, Singapore Airlines will increase the total issuance to S$750 million.


The application for the bond issue closes on 26 March 2019. Here’s what you need to know before investing.


Details of the bond



  • Coupon rate: 3.03%

  • Tenor: 5 years

  • Minimum amount: S$1,000, and in multiples of S$1,000 thereafter

  • Interest payment frequency: Semi-annual payment

  • Maturity date: 28 March 2024

  • Bond type: Unsecured bond (meaning that there is no collateral backing the bonds)


Singapore Airlines’ financial position


The most important consideration when investing in bonds is whether your capital is secure. There are many factors that can affect the bond-issuer’s abilityto pay back its financial obligations, such as the issuer’s balance sheet, earnings, and cash flow generation.Here are the key numbers for Singapore Airlines that investors should take note of, from the first nine months of FY2019 (financial year ended 31 March 2019) and FY2018.




Source: Singapore airlines earnings announcement


There are a few things to note here. First, Singapore Airlines is a profitable business that has been generating positive cash flow from its operations. But in the last nine months, its balance sheet has deteriorated from a net debt position of S$559 million on 31 December 2017 to a net debt position of S$3.60 billion as of 31 December 2018.


The main reason for the higher net debt position is the company’s aggressive stance in making investments in recent times. Singapore Airlines had a net spend of S$8.29 billion on investments for the first nine months of FY2019 and FY2018; the investment amount far exceeds the cash generated from its operations.


Financial ratios


You should also consider a few financial ratios that can give you an idea of how easily Singapore Airlines can pay off its debts and interest expenses. I have highlighted some of them in the table below:




Source: Author’s computation using data from Singapore Airlines’ earnings update


The net debt-to-equity ratio and debt-to-asset ratios are both manageable at 29.3% and 17.9% respectively. The interest cover, which is calculated by dividing the company’s earnings before interest and tax (EBIT) by its interest expenses, measures how easily Singapore Airlines can pay off its financial expenses.At 6.7 times, the company looks to be able to comfortably service the interest on its borrowings.


Yield comparisons


You should compare a bond’s yield against other fixed income securities too. The table below shows the yields from other common fixed-income type of investments.




Source: Author’s compilation of data from various websites


The table above is a non-exhaustive list of other investment options available to retail investors. The Singapore Airlines five-year bond provides a higher yield than interest savings as well as the Singapore Savings 5-year Bond. However, these are relatively risk-free investments, while Singapore Airlines’ bonds – including the latest issue – carry with them the risk of default and missed coupon payments.


The Foolish takeaway


Before investing in Singapore Airlines’ latest five-year bond, you should consider whether your investment capital will be safe and if the company has the means to meet its financial obligations to pay the bond’s semi-annual coupons. Based on Singapore Airlines’ current balance sheet and the cash generated from operations in recent times, the company is in a reasonably good position to meet its financial obligations, in my view.


These being said, you should also take note of the huge decline in Singapore Airlines’ earnings in 2019. An airline’s profits could swing erratically due to fluctuating oil prices, which could, in turn, affect its cash flow generation. An extended period of lower earnings and plunging cash flows could put Singapore Airlines in a more difficult financial position.


On top of the risks involved, investors should be looking at the yield-spread between Singapore Airlines’ latest bond issue and other lower-risk investment options. A 3.03% yield is not much higher than the 2.12% yield on a Singapore Savings Bond with a similar term. As such, you will need to decide whether the marginally higher yield makes it worthwhile putting your money in the more risky Singapore Airlines bond.


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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 Jeremy Chia doesn't own shares in any companies mentioned.


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Singapore Airlines Ltd’s Latest Earnings: Fuel Costs Affect Profits Again
- Original Post from The Motley Fool Sg

Singapore Airlines Ltd (SGX: C6L) reported a downbeat set of earnings yesterday for the third quarter of the fiscal year ending 31 March 2019 (2018/2019).


Here are some of the key financial highlights from the third-quarter results:


1) Revenue grew 6.5% year-on-year to S$4.34 billion.


2) Total operating costs increased by 9.1% to S$3.95 billion.


3) As a result, operating profit declined by 14.6% to S$387.6 million.


4) Profit attributable to shareholders followed suit, dropping by 27%, from S$389.3 million to S$284.1 million.


5) Similarly, earnings per share ticked down by 27% from 32.9 cents to 24.0 cents.


6) As of 31 December 2018, SIA’s balance sheet had S$1.32 billion in cash and bank balances, and S$5.06 billion in total debt. This translates to a net debt position S$3.74 billion. This was a major step back from the S$559 million in net debt that SIA reported on 31 March 2018.


7) Operating cash flow, reduced by 5.8% year on year, from S$538.7 million to S$507 million. Capital expenditure, on the other hand, remained rather stable increasing only by S$4 million on year. This resulted in SIA’s free cash flow dropping by 4%, from negative S$1.0 billion to negative S$1.04 billion.


Revenue increased on the back of growth in passenger traffic while cargo flown revenue remained stable. Expenditures rose due to higher net fuel costs, this led to a decline in net profits. Net profits were also affected by losses at the group’s joint ventures, particularly NokScoot.


Operating profits broken down according to different segments in the group can be seen below:




Source: SIA 3rd quarter earnings report


The biggest decline in operating profits was seen at Scoot and SilkAir. This was due to increases in fuel costs for both brands and expansion costs at Scoot.


Outlook


Singapore Airlines commented on its outlook as follows:


“Overall passenger bookings in the forward months are tracking capacity growth, however, uncertainties surrounding US-China tariffs and their consequent effects on global trade flows, as well as Brexit, are clouding the overall demand outlook for both passenger and cargo. SIA will continue to be nimble and proactive in responding to pockets of weakness or opportunity by rebalancing supply across the network.


Significant progress has been made under the SIA Group’s three-year Transformation programme, enabled by the strong support of employees. Against a challenging operating environment, the Group’s suite of services and products launched over the past year, including new non-stop services and cabin upgrades, helped enhance the customer experience and grow revenue, while realizing operational and cost efficiencies.


The recent opening of KrisLab is also a significant step towards enhancing SIA’s digital capabilities. Serving as a creative test bed for internal innovation and cocreation with external partners, the lab will enable the Group to fully embrace digitalization and technology in all aspects of its business operations.”



SIA’s closing price on Wednesday’s stood at S$9.87, resulting in a price-to-earnings ratio of 13.1 and a dividend yield of 3.85%.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.


More reading



The Motley Fool Singapore writer, Esjay,contributed towards this article. Esjay does not own shares in Singapore Airlines Ltd. Motley Fool Director, David Kuo, does not own shares in SIA.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.


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