OVERVIEW:
SBS Transit is a leading bus and rail operator in SG. It is subsidiary of another listed company, ComfortDelgro. Its rail route includes North East Line, Downtown Line and LRT in SengKang and Punggol.
HIGHLIGHTS:
[1] Latest result saw 1H2017 operating profit leap 41% yoy, mainly due to contribution from bus services with transition to the Bus Contracting Model (BCM) and higher ridership from rail services, offset by lower average rail fare from the fare reduction effective since 2017. Staff costs up 11% yoy.
[2] Dividend declared for 1H2017 is 0.0365, ~ 50% jump from 1H2016.
[3] It is under net current liabilities of 240m, due to short term borrowing expiring soon. Debt gearing is 58%, and interest coverage > 10. Refinancing should not be issue with healthy balance book.
INVESTMENT THEMES:
[1] 1H Earning per shares - 0.0738 || Dividend ~ 0.0632
Last trading price, 2.5 translates to PE ~ 17 and dividend yield ~ 2.6%.
[2] Management expects higher revenue from public transports services (both bus and rail services) for FY2017. Downtown Line 3 is expected to commence revenue service by October.
PRICE TREND:
2017 peak, 2.8 translates to dividend ~ 2.3%. Early of the year saw it trading ~ 2.08, equivalent to 3% yield. Recent downfall is testing support ~ 2.48. Shall it be broken, next support shall be ~ 2.32. Considering its growing earning prospect, its weakening movement presents opportunity to accumulate.
RELEVANT LINKS:
[1] http://www.channelnewsasia.com/news/singapore/bus-industry-to-complete-transition-to-bus-contracting-model-on--7839882
[2] http://sbr.com.sg/transport-logistics/news/how-did-bus-contracting-model-change-public-bus-industry
[3] http://www.businesstimes.com.sg/transport/singapores-public-transport-council-starts-fare-review-exercise
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