Wolf Money(SBS Transit sold)

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Extract from month end review

I sold my position in SBS Transit not due to fundamental reason. In contrast, SBS transit might report better earning in q1 2024 with 3 months of full fare increases incorporated into their numbers. The company experienced a 1.6% growth in profit for FY23. Lone Wolf Fund walk away with a small gain from the sale. LWF holds no share in the company.

The selling was due largely to the dividend differential compare with other dividend paying companies. There are many dividend stocks yielding more than 6% vs SBS low 4%. SBS Transit didn’t include a special dividend in their latest result in conjunction with their golden jubilee celebration in FY2023. It was the best opportunity to reward your shareholders. There was no increase to their dividend payout ratio, to be inline with CDG and their sister company, Vicom 70% payout. SBS Transit continues to have a low payout ratio of 50%. It was disappointing but I have to accept their difficulty in rewarding shareholders. The company has a net cash amounting to $371m or $1.19 per share. I reckon SBS Transit should be nationalised or privatised for public good. I speculate the board might have to contend with public perception and constraint imposed on transport operator paying larger dividend with each yearly fare hike. In my honest opinion, there is no valid reason for an asset light business to hoard cash. For those unfamiliar to the public transport contracting model. LTA fund the buses, trains and infrastructure investments and public transport operators like SBS Transit are awarded contracts to run the service with no revenue and trade receivable risks. Capex spending is moderately low.

A merger with SMRT, taking the company out of public eyes should be considered. SBS Transit might want to rethink their status as a public listed company. Even those local listed companies with better growth and dividend yield had failed to attract Singaporean investors’ interest. Can a low growth, low yielding and low liquidity company attract investors interest? I don’t know. 2c worth. As usual, no menace in my opinion and they are not directed at anyone. I am just mainly stating the facts. Trying to satisfy both the public stakeholders’ and shareholders’ interest is a tough balancing act for the company. 

The sale of SBS share was a difficult decision given my son’s love for buses and trains. We have wonderful memories travelling on public transport. I always have a soft spot for the company. It is what it is, life goes on as usual. Capital will be redeployed. God bless to the good people at SBS Transit and other transport operators especially those frontline staffs for their selfless service to the commuters. I can not emphasise enough the importance of their role in serving the public. Thank you for the safe journey.🙏 

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All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence.

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