Key SGX Transportation Plays Cruised Through Recent Swings
  • Singapore Airlines, ComfortDelGro & SBS Transit have all gained in the 2018 YTD, averaging 8.0% total returns, compared to a 3.1% decline for the FTSE ST All Share Index. Since the end of April, the trio averaged 1.6% total returns, compared to 8.2% declines for the benchmark.
  • Amidst fuel prices advances, the trio have been expanding their operational landscapes with SIA’s digital innovation blueprint and new fleet & product offerings, ComfortDelGro stepping up the pace of M&A activity and SBS Transit expanding rail and bus services.
  • The key transportation trio have averaged 9.5% annualised returns over a the past five years, led by SBS Transit which has also consistently increased its dividends per share over the period. The trio currently average an indicative dividend yield of 3.7%.
Volatility in the price of Crude Oil has continued in recent sessions. Last night the price of Crude Oil futures traded above US$73.00 bbl on the concerns of tightening supplies, in addition to the Trump Administration requesting countries to cut all oil imports from Iran by 4 November. This saw the price of Crude Oil move above the recent 22 May high and form a fresh high that dates back to late 2014.

 

Despite the apparent increase in fuel prices, global transportation stocks have not declined to the same extent as Capital goods stocks or Financial stocks in the 2018 year thus far. In Singapore, the three stocks that provide transportation services to individuals in Singapore – Singapore Airlines, ComfortDelGro Corporation (“ComfortDelGro“) and SBS Transit have performed comparatively strongly – averaging 8.0% total returns in the 2018 year to date, compared to a 3.1% decline for the FTSE ST All Share Index. Since the end of 2017, the share price of ComfortDelGro has rebounded 15.2% from S$1.98 to S$2.28. Dividends have boost that return to 18.3%.

 

This comparative performance has also occurred on a longer term five year basis as illustrated below.

Over the past five years the trio of stocks have averaged 9.5% annualised total returns – ranging from 5.0% for Singapore Airlines to 15.1% for SBS Transit.

 

Shorter term, since the end of April 2018, the key transportation trio averaged 1.6% total returns, compared to an 8.2% decline for the FTSE ST All Share Index. Comparative performances are tabled below, to see more details on each stock in SGX StockFacts, click on the stock name.

 

Name SGX Code Market Cap 

S$M

27 Jun Closing Price Total Return YTD 

%

1 Year Total Return % P/E (x) Indicative Dividend Yield 

%

Singapore Airlines C6L 12,795 10.820 1.4 9.4 14.7 3.7
ComfortDelGro Corp C52 4,935 2.280 18.3 1.3 16.9 4.6
SBS Transit S61 804 2.580 4.4 1.8 15.4 3.0
Average 8.0 4.1 15.7 3.7

Source: Bloomberg & SGX StockFacts (data as of 27 June 2018).

 

While Fuel prices have been trending higher, the trio of stocks have noted recent expansions in their operational landscapes with a focus on prudent cost management.

 

Expanding Operational Landscapes

 

  • SIA Group has continued to focus on building the strength of its portfolio of airlines through key strategic initiatives. The next two years of SIA Group’s three-year transformation programme will further build on initiatives around enhancements to the customer experience, revenue growth and improvements in operational efficiency. The recent Digital Innovation Blueprint launch aims to establish the Group as a digital innovation leader in aviation and travel experience through greater value creation for customers and businesses. The Group has also been enhancing its industry-leading position in fleet and product offerings. SIA Cargo’s recently completed re-integration into SIA as well as the completion of the merger of Scoot and Tigerair under the Scoot brand are also providing greater efficiencies with the wider SIA Group.

 

  • ComfortDelGro maintains a 74.59% shareholding of SBS Transit. Initiatives to grow its operational landscapes outside of the SBS Transit business include the recent acquisition of new bus businesses in Australia and the UK and new taxi businesses in Australia, China and the UK. As noted in the ComfortDelGro sustainability report (click here), the company will also continue to make ongoing investments in new vehicles so as to reduce its emissions profile and will continue to support research into alternative fuels. With its 1QFY18 results Mr Yang Ban Seng, ComfortDelGro Managing Director/Group CEO noted that the first quarter of 2018 had been very eventful, with the Group inked several acquisitions as it stepped up its pace of mergers and acquisitions (M&As).

 

  • SBS Transit has expanded its rail and bus services. The SBS – Downtown Line (DTL) became fully operational in October 2017 and SBS Transit was successful in its bids for the Seletar and Bukit Merah Bus Packages. These were the third and fourth packages that were put up for tender by the Land Transport Authority under the two year-old Bus Contracting Model. In its FY17, SBS Transit also highlighted that it has beefed up 20 existing services with higher ridership demand by adding more buses to their fleet as well as replacing single deck ones with higher capacity double deck buses.

 

SGX Transportation Trio Average Indicative Dividend Yield of 3.7% Aligned with Benchmark

 

The world’s largest transportation stocks generally maintain dividend yields close to 2.0%.  However Singapore’s three transportation stocks  currently maintain an average indicative dividend yield that is more aligned with the FTSE ST All Share Index. The trio currently average a 3.7% indicative dividend yield.

 

For more details on the transportation trio click on the links below, which include Singapore Airlines FY17/18 Annual Report released before the Market Open this morning. 

Name 1QFY18 Results   Annual Report
Singapore Airlines Click Here Click Here
ComfortDelGro Corp Click Here Click Here
SBS Transit Click Here Click Here

Source: Bloomberg & SGX StockFacts (data as of 27 June 2018).

SBS Transit’s dividend per share (DPS) increased by a CAGR of 33% over the last five years to grow from SGD 0.018 per share in 2013 to SGD 0.076 per share in 2017. SBS Transit maintain a general dividend policy of distributing at least half of their profits as dividend. For more information on the five STI stocks that have consistently increased their dividends over the past five years, click here.