Category: SBSTransit
Land Transport – AmFraser
4Q09: Improved ridership momentum
• Total rail ridership grew 4% YoY in 2009, boosted by better 6% YoY growth in 4Q09. 4Q was the highest quarter in 2009, enjoying 177.2 million rides by commuters. In contrast, 3Q was the peak quarter – with 169.4 million rides – in 2008. In total, commuters took 676.8 million rail trips in 2009.
• MRT ridership fared a better 4% YoY growth in 2009 against 3% YoY growth in LRT ridership. LRT ridership accounts for an insignificant 4.9% of total ridership. Four MRT lines – North-South Line (NSL), East-West Line (EWL), North-East Line (NEL) and partially-opened Circle Line (CCL) enjoyed a combined 643.8 million trips by commuters. Three LRT lines – Bukit Pangjang, Sengkang and Ponggol – saw 33 million trips for the year.
• For 2009, ComfortDelGro’s (CD) rail ridership fared better than SMRT, despite reverse in 4Q09. Through 75.3%-owned Singapore Bus Service Transit (SBST), CD’s only MRT line (NEL) and two feeder LRT lines (Sengkang and Ponggol) to NEL, saw a combined 6% YoY growth to 135.6 million trips in 2009. LRT accounts for 12% of this. In 4Q09, CD’s rail ridership grew 5% YoY to 35.7 million.
• Pick up in momentum for 4Q09 at SMRT pulls rail ridership growth to 4% YoY for 2009. SMRT saw a combined 137.3 million rides on its three MRT lines in 4Q09, representing 6% YoY growth, higher than the 2-3% YoY growth in the earlier quarters.
• Overall, incremental benefits from new Circle Line has not flowed through in 2009. Despite opening of a new MRT line since May 2009, 4% YoY growth in rail ridership for 2009 was much lower than the 12% YoY growth for 2008. As only one out of five stages of CCL is in operation so far, and CCL is more of a connecting line (an orbital line) to improve travel times and convenience, we believe more incremental benefits will flow through in the longer term from luring more commuters to take public transport when later stages of CCL are progressively opened. At the same time, while a slower economy dampened rail rides to some extent in 2009, a continued growth (+0.3% YoY) in car population also had an impact.
• In public scheduled bus services, CD’s dominant bus operations continued to fare poorer than SMRT’s in 4Q09. Overall bus ridership fell 1% YoY in 2009 to 1,115.5 million trips. SBST saw an improved flat 4Q09 over year ago which helped bring its full year to a 2% YoY fall to 827.9 million rides. SMRT also saw an improved 1% YoY growth in 4Q09, which helped bring full calendar year to a flat performance over 2008.
• On balance, ridership numbers released till December 2009, bodes better for CD. While CD’s bus ridership for FY2009 is a fall from 2008, this came in 1% higher than our forecast. At the same time, CD’s rail ridership came in 0.4% below our FY2009 forecast. Singapore bus accounts for a larger 20% of CD’s revenues, while rail accounts for a smaller 4%.
• SMRT’s 3QFY10 (YE March) reported MRT ridership of 137.3 million is 1% lower than our estimate. But on upside, bus ridership totalling 71.7 million (Dec 2009 estimated) is 2% above what we had factored in. However, the net effect is on the downside as MRT operations contribute 54% to revenues while bus accounts for 22%.
• Preview: Modest cut to SMRT’s FY10 estimates possible – but would not likely have drastic impact on rating. SMRT reports 3QFY10 (March) results 27 January after trading hours. CD reports FY09 (Dec) on 10 February. We reckon minor adjustments on ridership revision per se, could represent a 2% downward bias to SMRT’s fFY10 (March) earnings.
• Positive note for SMRT, we will start to see maiden contributions from Shenzhen ZONA Transportation Group in 3QFY10. The acquisition of ZONA – its first overseas foray in public transport services – was completed on 30 October 2009. While early contributions is insignificant in the near-term, SMRT expects this to be material within five years.
• CD still presents 15% upside to fair value of S$1.89 – maintain BUY rating. SMRT has appreciated 9% on our buy rating since our last report on 2 November 2009. Our current rating pends our results review report.
SBSTransit – BT
SBS Transit Q3 profit rises 27% to $10.6m
LOWER energy costs and government measures helped SBS Transit to offset the temporary fare reduction and post a 27.2 per cent increase in net profit to $10.58 million for the third quarter ended Sept 30, 2009.
But third-quarter revenue fell by 7.6 per cent to $174.33 million mainly because of the lower bus fare revenue.
Singapore’s biggest public transport operator said that Q3 operating expenses fell by 9.2 per cent, or $16.4 million, from $178.8 million in the same quarter the previous year, thanks to substantially lower fuel and electricity costs, as well as savings from the Singapore Government Budget 2009. But these were partially offset by higher depreciation, and repair and maintenance expenses.
Revenue from bus operations in Q3 fell 9.6 per cent to $136.3 million because of the fare reduction package, which began on April 1 this year, as well as the increase in transfer rebate. It was also affected by lower ridership, which was down 2.9 per cent in the third quarter.
But Q3 operating profit for bus operations rose 82.1 per cent to $1.6 million on lower fuel cost, which was partially offset by lower bus fare revenue, lower other operating income, higher depreciation expense and higher staff costs.
Rail operations saw revenue inch up 0.5 per cent in Q3 to $27.4 million on a 3.9 per cent increase in ridership for the North-East Line, and a 3.1 per cent rise for the two light rail transit systems. Together with lower electricity cost, they helped to push Q3 operating profit up 66.9 per cent to $3.6 million.
Earnings per share in the third quarter rose to 3.44 cents from 2.70 cents in the previous corresponding quarter.
For the first three quarters, SBS Transit saw a 43.0 per cent rise in net profit to $42.9 million, but year-to-date revenue slipped 4.3 per cent to $522.85 million. For the first nine months, earnings per share were 13.94 cents, up from 9.76 cents.
No dividend has been proposed.
Another unit of land transport giant ComfortDelGro also announced its Q3 results yesterday. Vicom said that growth in vehicle inspection, and test and inspection services boosted its net profit by 23.6 per cent to $5.07 million for the third quarter ended Sept 30, 2009.
But Q3 revenue was slowed down by the lower revenue from vehicle inspection and type approval services, as well as vehicle assessment services; it slipped 0.7 per cent to $19.52 million.
Group operating expenses dropped 7.7 per cent to $13.3 million in the third quarter due mainly to lower material and subcontractor costs, as well as the Jobs Credit grant, property tax and rental rebates.
Vicom’s Q3 earnings per share was 5.93 cents, up from 4.81 cents in the same quarter last year.
For the first three quarters, the vehicle inspection unit posted an 18.8 per cent rise in net profit to $15.06 million. Year-to-date revenue was also higher, up 5.4 per cent to $58.09 million.
Earnings per share for the first nine months rose to 17.59 cents from 14.94 cents in the same period a year ago. No dividend has been proposed.
SBS Transit shares fell two cents to $1.73 and Vicom shares fell one cent to $2.10 yesterday.
ComfortDelgro – BT
ComfortDelgro Q2 profit up 0.9% to $57.3m
Revenue dips 4% as it takes a hit from weaker pound and Australian dollar
COMFORTDELGRO has reported a marginal 0.9 per cent increase in second-quarter net profit to $57.3 million, supported by an exceptional gain of $26.5 million.
The group registered a 4 per cent dip in revenue to $758.3 million as earnings from foreign operations were hit by a weaker pound and Australian dollar.
Earnings per share rose to 2.74 cents from 2.73 cents a year ago. A dividend of 2.63 cents a share for the quarter will be paid out on Sept 8.
Revenue from bus operations slipped 3.9 per cent to $380.4 million as a result of declines in Singapore and the UK, although operations in Australia and China grew.
Revenue from bus services under SBS Transit dropped 7.4 per cent to $132.5 million as a result of the temporary fare reduction and increase in the transfer rebate – which started in April – as well as a drop in patronage.
Revenue from the taxi business fell 2.8 per cent to $230.7 million from a year earlier, dragged down by operations in the UK.
Revenue from the rail business was up 1.1 per cent to $26.3 million as average daily patronage of the North East Line and the Punggol and Sengkang LRTs grew.
Revenue from bus station business rose 13 per cent to $5.2 million, while revenue from vehicle inspection and testing was 6.5 per cent higher at $19.8 million.
ComfortDelGro group CEO Kua Hong Pak said: ‘Despite the economic downturn, we have achieved growth. While our businesses are fundamentally sound, we remain cautious given the uncertain outlook.’
DMG & Partners maintained a ‘buy’ on Comfort, with a target price of $1.78. Comfort’s stock closed at $1.57 yesterday, down two cents.
Separately, SBS Transit said yesterday that it has invested $159 million in 350 new single and double-decker buses from Sweden’s Scania and Volvo as part of its fleet renewal programme. SBS will have 1,450 new buses in its fleet.
Land Transport – DB
Expect 2H ridership to be stronger
January-May ridership growth affected by economic slowdown
YTD, average rail ridership has increased 3.7% YoY to 1.7m, while bus ridership has declined 0.7% YoY to 3.1m. We predicted growth of 6.4% YoY in rail ridership and 4.2% YoY in bus ridership. We are upbeat that ridership figures could be stronger than expected in 2H09 given Deutsche Bank’s forecast of a QoQ recovery in GDP. We maintain our positive view on the sector. We change our preference towards ComfortDelGro (CD) versus SMRT. CD is trading at a 20% discount to the market and offers 37% upside to our target price.
Higher YoY growth in ridership slightly below our forecasts
At SMRT (MRT SP; Buy; target price S$2.05), average daily rail ridership in May 2009 grew 2.5% YoY to 1.39m. On the margin, we are seeing higher YoY growth in May ridership compared to April (+2.3% YoY). Overall ridership numbers for rail and bus were at 2.9% YoY and -0.3% YoY, respectively. These are below our 2009 forecasts for rail and bus to increase by 6.0% and 4.7% YoY, respectively.
January-May ridership slightly below our expectations
ComfortDelGro’s (CD SP; Buy; S$1.75) average daily rail ridership in May 2009 grew 4.7% YoY to 0.35m, while its bus ridership declined 1.2% YoY to 2.26m. The trend continues to deteriorate due to the high base effect. We believe there could be a one quarter lag GDP and expect the turn in 3Q09. Overall rail ridership during January-May grew 6.9% YoY, slightly below our forecast for CD’s rail ridership to grow by 8% YoY in 2009. CD’s overall January-May bus ridership of -0.8% was below our forecast for bus ridership to increase by 4% YoY. We believe that lower oil prices could help buffer the slower ridership growth. Our analysis reveals that every 1% decline in oil could lead to a 0.6% increase in CD’s earnings.
Soft start to Circle Line (CCL) opening in May 2009
Circle Line, which opened towards the end of May 2009, had an average ridership of 30-35k per week. We believe the lower-than-expected ridership was due to the start of the June holidays. We forecast that CCL will operate at a minimal loss in the first year. Cost synergies at CCL could help SMRT reduce operating losses.
We now prefer CD over SMRT; reiterate Buy
We expect CD’s earnings to rebound in 2009, as the company could benefit from resilient ridership and moderating costs due to lower oil prices. The stock is trading back at 2003 levels and offers exceptional value with the risk of earnings falling short. We expect the disparity between the stock’s valuation and the Straits Times Index (STI) to narrow on: 1) upcoming 2Q09 results (our forecasts are 6% above consensus), 2) further appreciation of the GBP and AUD, which could boost its overseas earnings, and 3) higher earnings from its overseas acquisitions.
Beneficiary of lower oil price, wage deflation, higher ridership and new rail
SMRT should benefit from: 1) a drop in oil prices, 2) lower staff costs, 3) resilient ridership growth, and 4) rental income stability due to long leases. We would be buyers on weakness in SMRT. The stock has outperformed the index by 7% in the past month. We will be tracking CCL’s ridership closely to see if the ridership figures can meet our expectations. SMRT is also likely to renew its electricity contract in July/August 2009.
SBSTransit – BT
SBS Transit, Vicom drop share issue general mandate
Move in response to shareholders’ expectations
IN a move that must have delighted shareholders, SBS Transit and Vicom – both subsidiaries of transport group ComfortDelGro – decided at their respective annual general meeting yesterday to drop a general mandate to issue shares.
In his AGM address, Lim Jit Poh, who is chairman of both companies, said: ‘We have decided to remove the general mandate to issue shares up to 50 per cent from this year’s AGM agenda. You will recall that we reduced the mandate to issue shares on a non-pro rata basis from 20 per cent to 10 per cent last year. We have now gone one step further and reduced it to zero.’
‘Such is our response to the changing business environment and investors’ expectations. We do not take our shareholders for granted. We respect their rights, just as they have shown confidence and trust in us.’
Earlier in his address, Mr Lim touched on the economic crisis and the group’s continued stress on the importance of good corporate governance.
The decision to drop the share issue mandate came despite a move by the regulatory authorities to allow companies to issue shares up to 100 per cent of their existing capital through pro-rata renounceable rights issues – versus 50 per cent previously.
Mr Lim also addressed the issue of an apparent dip in both companies’ dividend payout ratio, saying the management remained committed to the policy of paying half of its net profit as ordinary dividends.
‘Analysts say that this is a sharp drop compared to the previous years,’ he said.
‘What they have forgotten is that we paid out more than 50 per cent in dividends in previous years because we had to use all of our Section 44 tax credits within an approved time frame. We have always said that if we have no use for excess cash, we will declare more dividends,’ he added.
Mr Lim said SBS and Vicom are ‘monitoring and cutting costs where necessary as well as controlling all receivables’.
Capital expenditure has been frozen, and ‘all senior staff have had their salaries frozen and bonuses reduced’. He added: ‘The board has also decided that directors’ fees for 2008 should remain at the same level as that of the previous year even though there is a case for an upward revision in light of added responsibilities and duties.’
Mr Lim said the companies are financially sound and that ‘we are comfortable with our management practices and pursuits despite the present financial and economic crisis’.