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SBS Transit warns of ‘prolonged and uneven’ recovery

The transport operator was a major beneficiary of government reliefs, receiving nearly S$19 million in aid since last April.

Source: Bloomberg
  • SBS Transit Ltd (SGX: S61) share price falls to S$3.01 on Tuesday (11 May 2021)
  • This comes a day after the group shared a business update for the first quarter of 2021
  • The operator of North East Line and Downtown Line was able to post higher profits thanks to a slew of government reliefs
  • Looking ahead, SBS Transit says rail ridership numbers are unlikely to return to pre-Covid levels any time soon
  • Buy and sell SBS Transit shares with an IG account

SBS Transit Q1 results: What are the highlights?

SBS Transit shares are down 1.63% on Tuesday (11 May 2021), a day after releasing its Q1 2021 business update.

The transport operator’s share price is even year-to-date.

The transport operator saw its 1Q 2021 revenue decline 6.5% year-on-year to S$316.98 million from S$338.99 million.

The decline was mainly due to a S$21.1 million drop in revenue from the Public Transport Services segment as a result of lower rail ridership and lower service fee. Other Commercial Services registered a S$0.9 million revenue drop mainly due to lower advertising revenue.

Operating costs for the quarter came in 10% lower at S$292.07 million from S$324.41 a year ago.

SBS Transit said the wage subsidy from the Job Support Scheme (JSS), which only started from April 2020 - the second quarter of 2020, helped to negate the effects of Covid-19. JSS for 1Q 2021 was much higher than the corresponding period last year.

Correspondingly, operating profit grew by 70.9% year-on-year, or S$10.3 million, to S$24.91 million in the first quarter. Profit after tax also grew 12.17% to S$23.31 million.

Excluding the government reliefs, which amounted to S$18.57 million in 1Q 2021, the group would otherwise have recorded an operating profit of S$6.3 million, as compared to an operating profit of S$13.4 million a year ago, representing a decline of S$7.01 million or 52.5%.

Finally, earnings before interest, taxes, depreciation and amortisation (EBITDA) was 9.68% higher year-on-year at S$50.32 million.

What is SBS Transit’s outlook for the rest of 2021?

Looking ahead, the group said that the road to recovery is ‘prolonged and uneven’, and this is ‘barring any Covid-19 second wave spread in Singapore’.

It also stated that while rail ridership is improving, the numbers are ‘unlikely’ to return to pre-Covid levels, as more companies have been adopting working-from-home practices.

As of the end of March 2021, the North East Line and Downtown Line saw ridership recover to 65% and 70% of pre-Covid levels respectively.

But in view of the increased number of local community cases in recent weeks, the government announced on 04 May 2021 that measures to reduce social group sizes from eight people to five. The proportion of employees allowed physically in offices will also be reduced to 50%, down from the 75%.

Furthermore, the JSS is also expected to be scaled down with ‘much lower levels of support’ in 2021, as previously announced in Budget 2021.

Nevertheless, SBS Transit says it will continue to focus on its digital transformation plans, and continue to build up its capabilities.

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