"Ah Beng Commuter" contributed this article to NextInsight. He says he no good in English but stock investing is different. He better than those got CFA and many As in exams.
 SBS Transit operates the North East Line, the Downtown Line and the Sengkang-Punggol LRT line. Photo: www.sgtrains.comWah lau eh, LTA announced big purchase. It will buy operating assets of the North-South, East-West and Circle Lines from SMRT Trains and also the operating assets of the Bukit Panjang Light Rail Transit from SMRT Trains' self-owned subsidiary, SMRT Light Rail.
The price is the net book value of about S$991 million (S$1,060 million including GST) of the operating assets. This amount is to pay over three years. I think, maybe same same asset sale can happen with SBS Transit. I think also same same at about the net book value. Payment also same same --- 60% upfront and then pay the rest over 3 years at 15%, 15% and finally 10%. I think SBS Transit asset mostly bus and the net tangible asset (NTA) is about $900 million. (Government got say that it wants to also buy bus assets) SBS Transit got borrowings of about $300 million. I think they will pay off the borrowings using money from the asset sale.
About 28% of SBS Transit NTA is share capital and the other 72% is old profit not pay out as dividend. Careful business do thing like that one. So, if SBS Transit think old profit no need to keep in company anymore, it can pay a special dividend maybe 60 - 65 cents for one share over the next 3 years. Got to wait for LTA to pay money first, then can pay special dividend. After LTA buys over buses and other things from SBS Transit, the company maybe no need so much share capital - about $94 million you know. They can also give some capital back to shareholders. This happens, I very happy but I don't think the directors will recommend because they very careful one. One more thing, you see the profit before interest and tax, they call EBIT, is 10.7% for SMRT. After sell assets to LTA, using new formula under the New Rail Financing Framework, it will be around 5%. This is same same arrangement in other countries also operating like that. So, EBIT for SMRT, I think can fall and maybe not small you know: from 10.7% become 5%.
But you see EBIT for SBS Transit is about 2.5%. If same same formula for SMRT also allow for SBS Transit after bus assets sell to LTA of 5%, then EBIT for SBS Transit can be higher because EBIT of SBS Transit is now only 2.5%. |
