What Investors Should Know About SBS Transit Ltd’s Latest Earnings
- Original Post from The Motley Fool Sg

Yesterday, SBS Transit Ltd (SGX: S61) announced its financial results for the first quarter ended 31 March 2018. Here are 10 things investors should know from the earnings announcement:
1. Revenue for the 2018 first-quarter soared 15.8% to S$328.2 million.
2. SBS Transit said that revenue from Public Transport Services (consisting of bus and rail operations) improved by 16.3% year-on-year to S$313.3 million. The rise was mostly due to higher fees earned under the Bus Contracting Model with higher operated mileage, higher ridership from rail services with the commencement of Downtown Line (DTL) 3 from the end of October 2017, and higher other operating income. This was offset partially by lower average rail fare due to the fare reduction since the tail-end of last year.
3. Other operating income rose mainly on the back of “one-off recovery of Seletar pre-operation costs and income from the provision of shuttle services”.
4. The average daily ridership for all the rail networks operated by the firm grew year-on-year, with the most significant growth coming from the DTL. The average daily ridership for the line ballooned by 75.8% to 431,000 passenger trips due to the opening of DTL 3.
5. The commencement of DTL 3 also helped improved revenue from Other Commercial Services (SBS Transit’s rental and advertising businesses), which rose 6.6% to S$14.9 million. Revenue from this segment went up mainly due to higher advertising revenue from the newest line.
6. Net profit attributable to shareholders surged 63.7% to S$16.8 million. Consequently, diluted earnings per share (EPS) for the quarter rose to 5.38 Singapore cents, up from 3.30 cents a year ago.
7. Net profit margin improved from 3.6% last year to 5.1% in the latest quarter.
8. The balance sheet carried S$6.0 million in cash and bank balances, and S$197.0 million in total debt, as of 31 March 2018. This translates to a net debt position S$191.0 million, a decline as compared to the end of last year (S$5.3 million in cash hoard and total borrowings of S$181.0 million, giving a net cash position of S$175.7 million).
9. Operating cash flow improved for the quarter, which came in at a negative S$37.6 million as compared to a negative S$51.6 million last year. With capital expenditure decreasing from S$7.8 million last year to S$4.2 million in the latest quarter, SBS Transit’s free cash flow improved from a negative S$59.3 million to a negative S$41.8 million.
10. In its outlook statement, the land transport outfit said that revenue from the Public Transport Services is expected to be higher while revenue from Other Commercial Services is likely to be maintained. Of the Public Transport Services revenue, bus service revenue should grow due to the commencement of the Seletar bus package from 11 March 2018. The Bukit Merah bus package, which SBS Transit won in February this year, which will start operations in the fourth quarter of 2018. As for the rail services, revenue is expected to grow due to a full-year revenue contribution from DTL 3. However, the fare reduction, with effect from December 2017, could partially offset the higher revenue from DTL 3. SBS Transit also added that operating costs would rise due to higher staff costs.
At yesterday’s closing price of S$2.58, SBS Transit is going at close to 15 times its trailing earnings and has a trailing dividend yield of 2.9%.
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What I Learnt From SBS Transit Ltd’s 2017 Annual General Meeting
- Original Post from The Motley Fool Sg

On the morning of 25 April 2018, SBS Transit Ltd (SGX: S61) held its annual general meeting (AGM) for 2017. As a shareholder, I attended the AGM to gain more insights into the business.
The following is what I learnt from the presentation on SBS Transit’s financial results for 2017 by Tan Poh Choo, Evelyn, who is the company’s Senior Vice President (Finance).
The company’s key milestones for 2017 included: (1) A full-year’s contribution from the Bus Contracting Model (BCM) contracts, compared to just four-months in 2016; (2) winning the Seletar bus package; and (3) the commencement of revenues from Downtown Line Stage 3 (DTL3) on 21 October 2017. With DTL3, SBS Transit’s rail business covers a total rail-distance of 82km, representing a market share of 36%.
In 2017, SBS Transit’s revenue increased by 8.5% to S$1.19 billion due to higher revenue from its Public Transport Services segment which more than offset lower revenue from the Other Commercial Services segment.
The Public Transport Services segment saw improvements primarily due to the full-year revenue contribution from the BCM contracts, and higher ridership from rail services with the opening of DTL3 in October 2017. Revenue from the Other Commercial Services segment declined by 12.4% to S$56 million because of lower advertising and rental income from the loss of the Bulim and Loyang bus packages.
SBS Transit’s operating costs increased by 7.1% from S$1.06 billion in 2016 to S$1.13 billion in 2017, mainly due to higher staff costs, and repairs and maintenance expenses. Staff costs grew because the company needed to increase its headcount in preparation for DTL3, while repairs and maintenance costs increased due to higher maintenance required from the company’s aged transport fleet.
Operating profit increased by 42.1% to S$59.3 million, while net profit grew 50.3% to S$47.1 million. The company’s operating profit margin increased from 3.8% in 2016 to 5% in 2017, and its return on equity climbed from 8.3% to 10.9%. Earnings per share jumped by nearly 50% from 10.12 Singapore cents to 15.17 Singapore cents, in line with the net profit growth. SBS Transit’s total dividend per share (which was approved by shareholders later during the AGM), was raised from 5.05 Singapore cents in 2016 to 7.60 Singapore cents in 2017.
Before the BCM came into play, SBS Transit had to incur significant capital expenditure (capex) to acquire buses. With the BCM, the LTA is the one having to buy the buses. Therefore, capex for SBS Transit has fallen significantly. For example, at the peak in 2014, SBS Transit’s capex was S$214.4 million and its gearing ratio (total debt over equity) was 155.6%. In 2017, these have improved considerably to S$35 million and 40.3% respectively.
In 2018, SBS Transit said it would focus on:
1) The Seletar bus package, which started on 11 March (with the Selatar package, SBS Transit now has a market share of 62% of Singapore’s bus network);
2) The New Rail Financing Framework (NRFF) for the North East Line and the Sengkang and Punggol Light Rapid Transit which commenced on 1 April 2018 (you can learn more about the NRFF here); and
3) The commencement of the Bukit Merah bus package from 18 November 2018.
My Foolish takeaway
It was a stellar 2017 for SBS Transit. It will be interesting to watch how 2018 pans out for the company with the transition of the rail business to the NRFF, a full-year contribution from DTL3, and the second whole year where the bus operations will be under the BCM.
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SBS Transit Ltd’s 2017 Annual Report: Key Takeaways About The Firm’s Growth
- Original Post from The Motley Fool Sg

SBS Transit Ltd (SGX: S61) provides bus and rail services to the Singapore public. Under the rail services business, SBS Transit operates the North East Line (NEL), the Downtone Line (DTL), and the Sengkang and Punggol Light Rapid Transit (SPLRT).
Earlier this month, SBS Transit released its annual report for its financial year ended 31 December 2017. I learnt a few things about the company’s growth potential as I was reading through the Chairman’s statement, one of the many sections in the report. Here are a few takeaways.
Transition to the New Rail Financing Framework (NRFF)
On 1 April 2018, the NEL and the SPLRT systems transitioned to the NRFF. DTL was already under the new framework.
Under the NRFF, the Land Transport Authority (LTA) will buy over SBS Transit’s existing rail assets. The LTA will then own and pay for the assets, including additions, renewals, and replacements. SBS Transit’s chairman, Lim Jit Poh, said:
“LTA will make the capital investments in operating assets and thereby retain the ability and flexibility to decide on the additions, renewals and replacements and undertake long term planning for the rapid transit system network. This will be better for commuters and is a more sustainable option for us, as operators, in the long term.”
The NRFF is an asset-light model as the LTA will take care of capital investments for the operating assets. This should translate to higher free cash flow for SBS Transit, and thus the possibility of higher dividends for shareholders in the years ahead.
Foray into autonomous vehicles
As part of Singapore’s Smart Nation push, our island nation is looking into self-driving technology. According to the Smart Nation website, the relevant authorities are “exploring the application of self-driving technology to public transport not only to bring in new forms of shared mobility, but also to address the constraints we face in land and manpower.”
SBS Transit is also involved in Singapore’s drive towards autonomous vehicles. Lim explained:
“With Autonomous Vehicles (AV) being the future of mobility, we are in collaboration with ST Kinetics (STK) to develop AV omnibuses for use on our public transport system. We have started providing STK with inputs on our bus operations’ and customers’ needs. We expect to begin field trials of two AV buses in the first half of 2019 followed by a full trial in May 2020.”
ST Kinetics is the land systems and specialty vehicles division of Singapore Technologies Engineering Ltd (SGX: S63). With vast experience in the land transport industry, SBS Transit should be able to provide key insights into the development of the self-driving omnibuses.
“Hey, bus! Come to me”
The most interesting growth avenue, to me, is SBS Transit’s partnership with local start-up, the Ministry of Movement (SWAT). The two companies are working on providing on-demand, dynamically-routed public bus services (ODBS). ODBS allows commuters to make more direct journeys while optimising resources.
Lim gave more colour on the collaboration in SBS Transit’s latest annual report:
“Under the plan, we are to handle the bus operations while SWAT provides the booking platform. We are heartened that SWAT was awarded the contract in February 2018 by the LTA to conduct the first phase of the ODBS.
We will be supporting the project with simulations to demonstrate and refine the service standard and resource requirements to enable LTA to determine the operational trial parameters. At the same time, SWAT will develop a dynamic matching and routing algorithm which will enable the buses to be deployed according to real-time commuter demand. The second phase of the tender is scheduled in the third quarter of 2018.”
If the ODBS by the two firms is successfully implemented on Singapore’s roads, we could potentially see a new revenue stream for SBS Transit. More importantly, such an on-demand bus service would give commuters more travel options, on top of the regular transportation modes currently available.
The Foolish takeaway
Instead of just focusing on its traditional business of providing basic bus and rail services, it is interesting to know that SBS Transit is working on new technologies and initiatives such as self-driving vehicles and on-demand bus services. The NRFF could bode well for the company in the years ahead as well.
$SBS Transit(S61.SI) $SBS Transit(S61.SI) $ST Engineering(S63.SI)

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1 Simple Number To Understand 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. It operates mainly in two segments: Public Transport Services (consisting of bus and rail services) and Other Commercial Services (advertising and rental). SBS Transit is a subsidiary of local land transport giant, ComfortDelGro Corporation Ltd (SGX: C52).
In this article, I want to dig deep into SBS Transit’s return on equity (ROE).
Why ROE?
ROE is a measure of the profitability of each dollar of investor’s capital.
For example, a ROE of 20% means that a company generates $0.20 for every dollar of shareholders’ capital invested in the business. The higher the ROE, the more profitable each dollar of investors’ capital is.
The simplified calculation that most investors use is as follows:
ROE = net profit / shareholder’s equity
Here, however, we will take a different approach to calculate the ROE:
ROE = asset turnover x net profit margin x asset/equity
Doing so will reveal to us three pillars of the company – asset management, profitability and financial leverage. For more information about this breakdown, please head here.
With that, let’s calculate the ROE of SBS Transit.
The actual numbers
Asset turnover measures the efficiency of a company’s use of its assets in generating sales. The calculation of asset turnover is sales divided by asset.
For SBS Transit, it had total revenue of S$1, 191.7 million and total assets of S$1, 087.8 million for its fiscal year ended 31 December 2017 (FY2017). This gives an asset turnover of 1.1.
Net profit margin measures the percentage of sales that is left over for shareholders after deducting all the expenses. In FY2017, SBS Transit had a net profit margin of 4.0%, given its net profit of S$47.1 million and revenue of S$1, 191.7 million.
Lastly, we have the leverage ratio, which shows the relationship of a company’s total assets to its equity. It is calculated by dividing total assets by equity. A higher ratio means that a company is funding its assets with more liabilities, hence resulting in higher risk. In FY2017, SBS Transit had total assets and total equity of S$1, 087.8 million and S$449.2 million respectively. This gives a leverage ratio of 2.4.
When we put all the numbers together, we arrive at a ROE of 10.6%.
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SBS Transit Ltd’s Full Transition to the New Rail Financing Framework: What Investors Need to Know
- Original Post from The Motley Fool Sg

SBS Transit Ltd (SGX: S61) provides bus and rail services to the Singapore public. A few days after the company announced its 2017 financial results, it said that it would transition entirely to the New Rail Financing Framework (NRFF).
Here are 10 key things from the announcement that investors would be interested to know:
1. SBS Transit will operate the North East Line (NEL) and the Sengkang and Punggol Light Rapid Transit (SPLRT) under the NRFF from 1 April 2018. The Downtown Line is already under the new framework.
2. Under the NRFF, the Land Transport Authority (LTA) will buy over the existing rail assets from SBS Transit. It will then own and pay for the assets, including additions, renewals and replacements.
3. With the change, all SBS Transit’s rail assets will be under the NRFF.
4. The NRFF is an asset-light model as the LTA will take care of capital investments for the operating assets.
5. SBS Transit will pay an annual licence fee to the LTA over the licence period for the right to operate, maintain and derive revenue from the rail systems. The licence period for the NEL and SPLRT is 15 years from 1 April 2018, with a possibility to extend for five more years.
6. The structure under the NRFF offers revenue risk mitigation and profit sharing based on specific percentages.
7. The LTA will acquire SBS Transit’s rail operating assets based on the net book value (NAV) as at 31 March 2018, which is estimated to be around S$28.8 million.
8. The authority will pay 60% of the total transaction amount on April 1, and the rest over the next two years. SBS Transit wants to use the proceeds to pare down debt.
9. As at 31 December 2017, the transport operator had total borrowings of S$181 million and S$804 million in total operating assets (defined as “vehicles, premises and equipment” under the balance sheet).
10. SBS Transit’s chief executive, Gan Juay Kiat, said:
“The New Rail Financing Framework is a more sustainable model for us in the long term. It enables us to focus on the operations and maintenance of the rail systems so that we can improve our service delivery further. It relieves us of the cost of asset renewal and upgrade, and of procuring additional operating assets when ridership demand increases, in order to meet service level and reliability standards set by the LTA.”
The move to the NRFF is in addition to the bus assets being under the Bus Contracting Model (BCM) since September 2016. The NRFF and BCM could potentially transform SBS Transit into a “dividend machine” as the firm no longer needs to fork out money to replace or buy new trains and buses.
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Quick Thought Of The Week: Predictions
- Original Post from The Motley Fool Sg

According to Feng Shui experts, the year of the Earth Dog is supposed to be good for so-called “fire” industries. These are said to include the internet, utilities and technology.
Some say pharmaceuticals are supposed to be good, too.
This time last year, the Fire Rooster took centre stage. That was supposed to augur well for the gaming, transport, oil & gas, utilities, technology and telecom industries.
With the benefit of hindsight, Genting Singapore (SGX: G13) did, in fact, have a good year. Its shares were up by almost a third in the Year of the Rooster.
It was a mixed bag for the transportation sector, though. Singapore Airlines (SGX: C6L) and SBS Transit (SGX: S61) just about held their own against the Straits Times Index (SGX: ^ST).
But it was a very different story for ComfortDelGro (SGX: C52).
Utilities were unconvincing. Sembcorp Industries (SGX: U96) kept its head above water. Telecoms did badly. Both Singtel (SGX: Z74) and StarHub (SGX: CC3) lost more than a-tenth of their market value over the 12 months.
Given their patchy record, what should we make of geomancers’ fondness for the internet, utilities and technology sectors in the Year of the Dog?
Within any sector, there will always be some good and some not-so-great businesses. I am sure some will do well. The same goes for dogs.
So, our job as stock pickers is to always find the best of breed. That is how we achieve alpha and beat the market.
Just as it can be wrong to dismiss an entire sector, it is equally remiss embrace an entire sector without doing proper research.
Peter Lynch once said that investing without doing research is like playing stud poker without looking at the cards.
None of us would ever dream of doing that. It would be barking mad to do so.
Gong Xi Fa Cai! Have a prosperous Year of the Dog.
A version of this article first appeared in Stock Advisor.
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