Here are some SMRT segmental information from the latest full year results. Particularly of concern is the latest 4th quarter performance.
- Train Operations:Revenue=149m (13% rise), Profit=19m (21% fall)
- LRT Operations:Revenue=2.6m(11% rise), Profit=0.068m (217% rise)
- Bus Operations:Revenue=55m(5.3% rise), Profit= -3.7m (110% fall)
- Taxi Operations:Revenue=29m(23% rise), Profit=1.2m (131% rise)
- Rental:Revenue=21m(14% rise), Profit=16m (14% rise)
- Advertising:Revenue=8.2m(37% rise), Profit=5m (25% rise)
- Engineering:Revenue=8m(1% fall), Profit=1.5m (77% fall)
Of real consequence have been that of train, rental, advertising and engineering. Train and engineering have fallen badly while rental and advertising have sustain it.
The main attributable cause was energy and depreciation cost. With the bad press SMRT have been getting, couple with the announced 900m capital injection to improve on operations, this will further increase their depreciation expense.
I do see much benefit from their previous CEO’s drive for Rental and advertising. That have been substantial to cushion part of the costs going forward. Had she not put effort into it, SMRT’s result would have been much worse.
Net Cash Position
Although we see deterioration in earnings, balance sheet wise, SMRT is in a good position. Although they went from net cash of 125 mil to 44 mil.
Free Cash Flow Dwindling to pay Sustain Dividends
Free cash flow, which is a pretty good measure of how much cash a company has to pay out dividend from operations is worsening.
In FY 2011, free cash flow was 179 mil. In FY 2012, it became, 48 mil. Operating cash flow was the same, just that there were more capital expenditure spending.
To pay out the $0.085 dividend, SMRT requires 129 mil. If capex for the next few years is going to increase, then I am afraid dividends will be hard to pay off.
Assuming that out of the 900 mil, SMRT will assume 75% of it, this comes up to, 675 mil. Spread over 5 years, an annual increase in capex will be roughly 135 mil.
Just base on this alone, the free cash flow comes up to 150 mil, meaning to say to pay that 129 mil, SMRT may have to tap perpetual shares or preference shares, so that they can still have adequate cash flow to pay a smaller dividends and fund this capex