What Does ComfortDelgro Corporation Limited’s Cash Flow Tell Us About Its Dividend
- Original Post from The Motley Fool Sg

ComfortDelgro Corporation Limited (SGX: C52) is a transport company with operations mainly in Singapore, Australia, the United Kingdom, and China. It’s the largest taxi operator in Singapore and also the majority owner of vehicle and non-vehicle testing and inspection outfit Vicom Limited (SGX: V01) and bus and rail services operator SBS Transit Ltd (SGX: S61).
As a quick recap, what we are trying to do here is to address the following question:
Is Comfortdelgro’s current dividend sustainable in the foreseeable future?
To address the above question, we will use three simple tests 1) the company’s track record in making profit 2) free cash flow and dividend analysis 3) balance sheet strength to give us an overview.
In this article, we will look at the analysis of the free cash flow and dividend payments in the last 5 years.
Readers can click here and here for the other 2 parts of the analysis.
Free cash flow:
For ComfortDelGro to pay dividends, it must be able to generate cash, pay its bills, invest in capital expenditure and pay out dividends from the left over cash. In financial term, the leftover cash after paying the bills and capital expenditure is known as free cash flow.
The idea here is pretty straight forward – a company cannot sustainably pay out more dividend than its free cash flow in the long term.
So what we want to find out here is whether the company has kept its dividend payments in the past 5 years within its means.
So let’s look at a graph to illustrate the free cash flow and dividend paid in the last 5 years:

And for those who are interested in how the numbers are derived, please see below:
Free cash flow analysis:
S$ million
2012-12
2013-12
2014-12
2015-12
2016-12
Operating cash flow
657
670
713
717
808
Interest and dividend received
17
16
16
17
17
Interest paid/payment to non-controlling shareholders
-33
-28
-33
-32
-31
Capital expenditure (net disposal)
-484
-415
-471
-388
-388
Other acquisitions/divestments
25
-141
-29
-2
-1
Free cash flow
182
102
196
313
405
Dividend paid to shareholders
130
138
165
183
199
 Source: Comfortdelgro 2012 to 2016 Annual Reports
Note – free cash flow calculation may not be exactly the same as other sources due to difference in adjustments used.
From the above, we can see that ComfortDelGro free cash flow to dividend payment has remained reasonable throughout the years. Only once in the last 5 years did the company pay more dividend that its free cash flow.
During the period, total free cash flow was about $1.2 billion whilst total dividend paid was about $0.8 billion.
Conclusion:
ComfortDelGro has mostly kept dividend payments within its means in the last five years.
In the absence of any significant decline in free cash flow, the company should be able to sustain the current dividend payout ratio.
We will now proceed to our final test here.
$ComfortDelGro(C52.SI) $SBS Transit(S61.SI) $VICOM(V01.SI)

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1 Simple Number for Understanding 3 Important Areas of SBS Transit Ltd’s Business
- Original Post from The Motley Fool Sg

SBS Transit Ltd (SGX: S61) operates public bus and rail services in Singapore. The company is a subsidiary of local land transport giantComfortDelGro Corporation Ltd (SGX: C52).


Today we’re digging deep into SBS Transit’s return on equity, or ROE.


The choice of ROE


We’re using one metric — the return on equity, or ROE — to understand SBS Transit’s business. This financial metric gives investors important insight into a company’s ability to generate a profit using the shareholders’ capital it has.


A ROE of 20% means a company generates 20 cents in profit for every dollar of shareholders’ capital invested. In general, the higher a company’s ROE, the more profitable it is. A high ROE can also be a sign that a company has a high-quality business.


It’s worth noting that the use of high leverage — which increases the financial risk faced by a company — can also increase a company’s ROE.


Calculating the ROE


The ROE can be calculated using the following formula, which is the way many investors do it:


ROE = Net Profit / Shareholder’s Equity


The metric can also be calculated using a different approach, as shown below:


ROE = Asset Turnover x Net Profit Margin x Leverage Ratio


Calculating a company’s ROE in this way will reveal three important things: How well a company is managing its assets, how efficient it is at turning revenue into profit, and how much financial risk it could be taking on. You canlearn moreabout this formula for the ROE.


With that, let’s turn our attention to the ROE of SBS Transit.


The actual numbers


Asset turnover measures the efficiency of a company in using its assets to generate revenue. It is calculated by dividing a company’s total revenue by its assets. SBS Transit had total revenue of S$1.38 billion and total assets of S$1.06 billion in its fiscal year ended 31 December 2018. This gives it a good asset turnover of 1.30.


The net profit margin measures the percentage of revenue left as profit after deducting all expenses.In 2018, SBS Transit had a low net profit margin of 5.8% given its net profit of S$80.1 million and revenue of S$1.38 billion.


Lastly, we have the leverage ratio, calculated by dividing a company’s total assets by equity.Ahigher ratio means a company is funding its assets with more liabilities, resulting in higher risk.In 2018, SBS Transit had total assets and total equity of S$1.06 billion and S$498.4 million, respectively, giving it a healthy leverage ratio of 2.13.


When we put all of the numbers together, we arrive at a strong ROE of 16% for SBS Transit for 2018.


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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SBS Transit Ltd’s Share Price Was Up By 37% Last Year. Is It a Good Business?
- Original Post from The Motley Fool Sg

SBS Transit Ltd (SGX: S61) operates public bus and rail services in Singapore, operating mainly in two segments: public transport services (the bus and rail services) and other commercial services (advertising and rental income). SBS Transit is a subsidiary of local land transport giantComfortDelGro Corporation Ltd(SGX: C52).


At the current price of S$3.60 (at time of writing), the company’s stock is up about 37% in the last 12 months. If SBS Transit has a high-quality business, its current low stock price could be an investment opportunity. There’s no easy way to know if SBS Transit’s business is of high-quality, but a simple metric can help shed some light: return on invested capital (ROIC).


A brief introduction to the ROIC


In a previousarticle, I explained how ROIC can be used to evaluate the quality of a business.



The simple idea behind the metric is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs, while the reverse is also true — a low ROIC is often associated with a low-quality business.


You can see how the math works for ROIC in the formula above.


SBS Transit’s ROIC


The table below shows SBS Transit’s ROIC using numbers from its fiscal year ended 31 December 2018 (FY2018).



Source: SBS Transit’s Financial Statements


In FY2018, SBS Transit generated a ROIC of 14.7%. This means for every dollar of capital invested in the business, SBS Transit earned 14.7 Singapore cents in profit. The company’s ROIC of 14.7% is above the average based on the ROICs of many other companies I have studied in the past. This suggests that SBS Transit has an above-average business.


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


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ComfortDelGro’s Latest Earnings: Uninspiring Profits
- Original Post from The Motley Fool Sg

ComfortDelGro Corporation Ltd (SGX: C52) is a land-transportation conglomerate with business interests in bus, taxi and rail services.


Apart from Singapore,it has a presence in six other countries, namely, China, United Kingdom, Australia, Malaysia, Ireland, and Vietnam.


ComfortDelGro announced its financial results for the full year ended 31 December 2018, yesterday.


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


1) Revenue grew 6.4% year-on-year to S$3.80 billion.


2) Total operating costs followed suit –increased by 6.3% to S$3.37 billion.


3) As a result, operating profit rose slightly by 2.8% to S$358.8 million.


4) Profit attributable to shareholders saw a 0.6% rise, from S$301.5 million to S$303.3 million.


5) Consequently, earnings per share moved from 13.95 cents to 14.01 cents, up 0.4%.


6) As of 31 December 2018, Comfortdelgo’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 Comfortdelgro reported a net cash position of S$273.9 million.


7) Operating cash flow, improved by 14.9%, from S$581.9 million a year ago to S$668.8 million. Net capital expenditure, on the other hand, decreased from S$283.6 million to S$226.1 million. This resulted in Comfortdelgro’s free cash flow surging by 48.4%, from S$298.3 million to S$442.7 million.


8) A final dividend of 6.15 cents was declared bringing the full year dividend to 10.5 cents, increasing by 0.96% year on year.


The increased top-line of 6.4% to S$3.8 billion for 2018 was due to higher revenue from new acquisitions and an increase in revenue from Public Transport Services, Inspection & Testing services, and Driving centre businesses. This was offset by weakness seen in the Taxi Business and the Automotive Engineering Services Business.


Operating costs increase in line with revenue due to higher staff cost, higher fuel, and electricity cost and higher repair and maintenance requirements.


Outlook


Going forward, Comfortdelgro commented that revenue from its Public Transport services in Singapore is expected to grow together with its Australian Bus Business. The Taxi business is expected to be maintained amidst the keener competitive environment. Other business segmented expected to be maintained are its Automotive engineering services, Inspection & Testing services, and Driving centre businesses. Lastly, its Car rental and Leasing business are expected to be lower.


Comfortdelgro also commented:


“The operating environment is expected to remain challenging. The Group will continue to manage costs prudently and seek growth and acquisition opportunities”


Comfortdelgro’s share price ended the day on Wednesday at S$2.38, resulting in a price-to-earnings ratio of 16.9 and a dividend yield of 4.4%.


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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The Motley Fool Singapore writer, Esjay,contributed towards 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.


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2 Companies to Watch This Week (StarHub Ltd and ComfortDelGro Corporation Ltd)
- Original Post from The Motley Fool Sg

This week, a host of companies will be giving updates on their results for the final quarter of 2018. Two companies in particular are in the spotlight:StarHub Ltd (SGX: CC3) and ComfortDelGro Corporation Ltd (SGX: C52). Here’s what investors should be looking out for when they release their results later this week.


Pay TV on the decline


StarHub Ltd is Singapore’s second largest telecommunications company. Its business can be divided into five main business segments: mobile, pay TV, broadband, enterprise fixed, and equipment sales.


In the past year, Starhub’s share price has fallen nearly 40% from its high of S$2.99 in 2018 due to disruptive competition from online streaming and a fourth telco company making its way into Singapore.


The company has suffered from lower revenue and profit from its mobile services and pay TV segments in the first nine months of 2018.


Despite a higher customer base recorded in its mobile services segment, there was an 8.3% decline in average revenue per user in the third quarter of 2018, which resulted in a 4.2% decrease in revenue from its mobile services.


Its pay TV segment has suffered due to competition from online streaming services such as Netflix. As a result, its customer base in the pay TV segment was down by 44,000, and average revenue per user decreased by $4 to S$47.


The lower average revenue per user has squeezed margins in the group, and so far this year, net profit has declined by close to 17%.



Source: StarHub Ltd 2018 Q3 Investor Presentation


In the upcoming earnings update, investors should watch for updates on the pay TV and mobile services segments. Is the company planning for strategic changes to tackle the decline, and what are its expectations for 2019? Hopefully, these answers will give investors a clearer idea of what’s in store in the future.


Bus and train services on the up


Like Starhub Ltd, ComfortDelGro is another company that has been facing disruptions to one of its core business segments. Ride-hailing apps such as Grab and Uber (when it was still in operation) have caused a decline in the ComfortDelGro taxi business. In Singapore, ComfortDelGro has been forced to decrease the size of its fleet, which has resulted in lower revenue contributions from the taxi business.


That said, ComfortDelGro also has other important business contributors, such as its public transports services business, which contributed 71% of the company’s revenue in the third quarter of 2018. Revenue from this segment grew by 15.1% in that quarter.In addition, ComfortDelGro has looked to expand its business overseas through the acquisition of bus lines in Australia and Wales.


In its last reporting quarter, the land transport giant said that it expects growth in its public transport services in Singapore and Australia due to the new bus lines. Its other segments are expected to be stable.


Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.


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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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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.


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


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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 Director David Kuoowns shares in SATS.



$SingTel(Z74.SI) $SIA(C6L.SI) $ComfortDelGro(C52.SI)

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