Tag Archives: SBS Transit

Comfort Delgro – local and overseas business segments

Comfort-Delgro (CDG) report a set of good results before the Chinese New Year. All the business segments contributed positively to the final results and have been quite broad-based.

The main revenue contributors were from the bus and taxi segments. The two segments contributed 80% of the total revenue. Unfortunately, the operating margins were relatively low at 8% and 11.8% respectively.

For the bus segment, given that the Singapore operations, which contributed about two-third of the total revenue was incurring losses. This means that overseas bus operations have been the main profit contributors for this segment. Hence, any weakness in the exchange rate of British pounds, Aussie dollars or Chinese yuan may affect CDG’s bus segment business going forward.

The taxi segment is a different story. Given that revenue from the local taxi segment takes up about 3/4 of the revenue from taxi segment ($961.2m against $1280b), it is very likely that the local taxi fleet is a major profit contributor to taxi segment.

Apart from the bus and taxi segments, the other segments are also doing well. However, their revenues are relatively low compare to the bus and taxi segments. The worst segment is the rail which contributed about only 3.9%. This also provides an indication that operational profit margin from the rail for SMRT may also be thereabout.

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Positives

  1. Net cash position. (Cash of $825.8m against long-term and short-term debt of $493.7m & $243.4m respectively.)
  2. Many sources of revenue and profit contributors.
  3. Assets transfer to government should be able to unlock more cash to enable Comfort-Delgro to invest in overseas (Total amount is about $1.1 to $1.2b).
  4. Low energy cost. Fuel and electricity takes up about 9.1% of the total operating cost. Last year, it spent about $329.8m against the total operating cost of $3609.2m.
  5. Generally easier to duplicate its bus operation system to other countries compare to rail operations.

Negatives

  1. PE is about 22, a bit too rich.
  2. Any weakness in the British pounds or Aussie dollars or Chinese Yuan could affect its profitability.

(Brennen Pak has been a stock investor for more than 25 years. He has accumulated a wealth of experience in shares investment. He is the chief trainer of BP Wealth Learning Centre LLP.)

I never imagined 1,000 Spore Bus share could have turned to $50,000.

This information may be a little belated, but I think it is worth a mention following the financial results announcement of the Comfort Delgro for FY 2014.

In September 2014, Mr Goh Eng Yeow, a senior correspondent with The Straits Times wrote the following on Sunday, 21 September 2014.

 “When I started working in 1986, I had the good fortune of buying 1,000 Singapore Bus Service shares, which cost $3,000 and gave me a concessionary monthly bus travel pass.

I kept the shares, which have multiplied through various issues and stock splits into 16,040 Comfort DelGro shares and 1,200 SBS Transit shares worth a total of $41,000. That gave me a total return of 1,260 per cent over a 28-year period.”

Like Mr Goh Eng Yeow, my first stock was the Singapore Bus. But I bought two years after him in 1988. I still managed to pay for the stock of around $3 per share (at $3.08 per share to be exact). The reason why there was not much change in the share price was that there had been a catastrophic event in October 1987, which had seen most of the markets plummeted more than 20% within one day on 19 October 1987 (or widely known as Black Monday). Perhaps, at that time when I purchased the stock, the share price was still recovering from its ‘shock’. I bought the share was not because I wanted to dabble in stocks for I know nothing about stocks at that time. Like him, what I merely wanted was to be able to purchase a monthly bus stamp to enable me unlimited travels on SBS buses, a habit that we were used to during our secondary school days. This ‘privilege’ to buy the monthly bus stamp was given to shareholders of Singapore Bus only.

That, however, was not that crux of the story. The main crux was, unlike Mr Goh who kept the share, I sold mine about 2 years later, thinking that the upside potential would be limited as the main mode of transport in future would be MRT instead of public buses. That would mean that our reliance on public buses would diminish with time. I managed to sell the shares at $6.64 per share. At that time, I thought I had made a right decision with more than 100% profit in my pocket. My regret came when I read the above news in September 2014 that the share after going through share swap, bonus issues and share splits would have become 16,040 Comfort Delgro shares and 1200 SBS Transit shares. With the last closing share price of Comfort Delgro and SBS Transit at $2.87 and $1.85 per share on 18th February, the total amount would have been $48,254.80. It would have been $50k when the share price of Comfort Delgro was at $3 per share. Should I have kept the Singapore Bus shares at that time, my annualised rate of return would have been around 11% consistently for the past 25 years. If I were to include the dividends that were distributed during these years, the returns would have been much more. It might be even that the dividends received during these few years could have fully recovered the share price that I had paid for.

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Even though I am holding some Comfort Delgro shares, which I am sitting on a profit of about 100% in the last few years, I still think that I should have held that 1,000 Singapore Bus share as not many companies offer such returns over the years.

 Moral of the story:

  1. Invest with a long-term mind-set.
  2. A stock that looks hopeless in the short run may turn out to be a gem in the long run. The company with good management is the KEY! Like what I mentioned in my book “Building wealth together through stocks”, a good management can help bring up the value of the share even though the product may look ordinary.

(Brennen Pak has been a stock investor for 25 years. He is a chief trainer for BP Wealth Learning Centre LLP. He is the author of Building Wealth Together Through Stocks.)