The year has been particularly unkind to the land transport sector. Within Singapore, the two-month-long “circuit breaker” caused ridership volumes to collapse. The subsequent work-from-home arrangements and travel restrictions have kept commuter traffic and taxi ridership down. The two listed transport operators — ComfortDelGro, and its subsidiary, SBS Transit — naturally, were hurt.
For nine months ended Sept 30, ComfortDelGro reported profit after tax of $33.5 million, down 87% y-o-y from $256.8 million in the year earlier. Revenue in the same period was down 19.3% y-o-y to $2.34 billion.
Meanwhile, public transport operator SBS Transit, which is around 75% owned by ComfortDelGro, reported profit after tax of $51.9 million, down 19.9% y-o-y over the same ninemonth period. Revenue, meanwhile, was down 15.7% y-o-y to $1.07 billion.
Though most businesses have resumed operations, the pandemic has had a knock-on effect on transport, particularly due to the absence of nightlife. With restaurants and bars forced to stop serving alcohol after 10.30pm, diners are heading home earlier than before. Along with work-from-home measures, these factors are hindering the recovery of the taxi business.
The average daily number of taxi trips plummeted from 16.2 in January to 8.0 in April among one-shift taxis, and from 24.3 to 11.3 among twoshift taxis. As the circuit breaker was extended, the figures fell further in May to 7.5 and 10.4, less than half their y-o-y numbers.
With fewer people out and about, leading to a further drop in passenger demand, more taxi drivers have presumably returned their vehicles. Singapore’s total taxi fleet declined from 18,528 in January to 16,110 in September, with sector leaders Comfort and CityCab, both owned by ComfortDelGro, following suit. Comfort saw its fleet shrink from 8,106 to 7,417 over the same period, while CityCab’s numbers fell from 2,695 to 2,456.
SMRT contributed to the sector’s steepest decline in May when it abruptly cut a third of its fleet from 2,454 in April to 1,698, a figure it has held steady since. In response to a query by The Edge Singapore, SMRT says the reduced fleet is in accordance with the company’s plan.
While the focus of the transport sector this time last year was on a 7% fare hike that started last December, the Public Transport Council (PTC) has decided not to grant any fare adjustments in this year’s Fare Review Exercise (FRE).
This comes after SMRT and SBS Transit had applied for the maximum increase of 4.4%, said the PTC.
That said, the maximum allowable fare adjustment computed for FRE 2020 of 4.4% will be rolled over to the next FRE in 2021.
Quiet streets
According to the PTC, whole-day ridership on trains and buses fell by around 75% during the circuit breaker. Singaporeans more accustomed to putting up with crowded trains suddenly found themselves in unsettling, half-empty carriages.
While the nine-month earnings drop was a dampener, the first-half report card, out in August, was worse. For the three months to June 30, the company recorded a loss of $42 million, and for the six months to June 30, it was still $6 million in the red.
In comparison, the company reported a $146.3 million net profit for 1H2019. “The first six months of 2020 have been nothing short of catastrophic,” said ComfortDelGro chairman Lim Jit Poh.
The company also skipped its interim dividend for the quarter. The transport operator’s bottomline, however, was buoyed by government reliefs. Without it, the loss would have been 11 times deeper at $66.1 million, said Lim.
To sustain its thousands of taxi hirers, ComfortDelGro waived taxi rental charges throughout the circuit breaker. The operator then halved fees in June, and gradually lowered the waiver over the following months.
The transport operator was not only hit on the taxi front. Rail ridership in June sat at 36% of pre-Covid-19 levels. Even after Phase 2 of Singapore’s reopening on Jun 19, rail ridership in July only returned to approximately 50% of what they were before the outbreak.
Global operations
In addition to Singapore, ComfortDelGro also operates bus and coach services in Australia, the United Kingdom, China, Ireland, Vietnam and Malaysia. These overseas operations made up 46.0% of ComfortDelGro’s revenue in 3QFY2020, compared to 42.5% in 3QFY2019, with Australia increasing its share of the pie from 16.6% to 19.4%.
With the darkest moments of the pandemic probably over, ComfortDelGro welcomes an “improved business outlook”, although it acknowledges that the risk environment continues to be fraught with uncertainties.
Its UK operations remained impacted in the fourth quarter due to a second national lockdown. ComfortDelGro expects its taxi, coach and charter businesses in England, Scotland and Ireland to be badly hit, though the Scottish and Irish governments have committed to coach services payments until March 2021.
Other issues loom on the horizon, however, with Brexit talks expected to continue next year and the current £1.7 billion ($3.02 billion) funding for Transport for London set to end in March.
See: 'Buy' ComfortDelGro on strong domestic recovery: RHB
Following the end of lockdown in Victoria, Australia on Oct 28, ComfortDelGro Australia expects to recover with “minimal impact” to the public bus business in New South Wales and Victoria.
The company noted some cancellations of night services in Melbourne and that the charter business remains sluggish with cancellation of discretionary events.
In China, where ComfortDelGro operates bus and taxi services, along with car rental services and driving centres, all government reliefs have ceased. As of November, its taxi fleet’s hire-out rate sits at more than 90%, with no further rental discounts given.
Road to recovery
As at end-September, ridership of rail, bus, and taxi have recovered to about 55%, 70% and 80% of pre-Covid levels, says ComfortDelGro. Daily ridership on the Downtown Line and North-East Line, both run by SBS Transit, are at 53% and 60% of pre-Covid-19 levels respectively.
While most bus services have resumed in June, SBS Transit’s Night Owl and Cross Border Bus services will remain suspended until end-2020.
CGS-CIMB analysts Ong Khang Chuen and Darren Ong expect rail ridership to recover to 75% of pre-Covid-19 levels by the end of the year, helped by the further easing of safe distancing measures in Singapore and a potential transition to Phase Three.
While SBS Transit’s 3QFY2020 net profit was down 3.5% y-o-y, the $19.4 million figure was above expectations, say the CGS-CIMB analysts.
In a Nov 12 note, the analysts highlight that 9M2020 net profit formed 94% of their previous full-year forecast. “The key surprise was better-than-expected cost control,” they say.
Operating costs fell 16.6% y-o-y to $282.5 million mainly due to lower staff costs that were mitigated by government reliefs, as well as lower costs from fuel, electricity, repairs and maintenance.
Looking ahead, CGS-CIMB forecasts a stronger 4QFY2020 for SBS Transit, projected to record a net profit of $23.1 million for the quarter, up 19.4% q-o-q and 40.5% y-o-y.
Similarly, despite the difficult year, ComfortDelGro is on the road to recovery “slowly but surely”, says DBS Group Research analyst Andy Sim. “ComfortDelGro’s 3QFY2020 business update shows operations have passed its worst point vs 2Q20, and improved q-o-q,” says Sim in a Nov 13 note.
See also: SBS Transit rolls forward with overall sector win
“The outlook remains patchy, but we continue to adopt the stance that recovery pace should gain ground going forward. With share price still hovering at its low levels and valuation on a PB basis at minus-two standard deviation of its historical average, we believe the probability is skewed towards share price appreciation as we progress into 2021. FY20F earnings look dismal, but as per 3QFY2020, we expect to see sequential improvement in 4QFY2020 and in 2021,” he adds.
Maybank Kim Eng analyst Kareen Chan highlights ComfortDelGro’s long-term fundamentals in its recovery. She sees the company enjoying a significant operating leverage in the coming FY2021 and FY2022, as ridership numbers normalise.
“Covid-19 has made [an] inflection point for recovery difficult to predict. That said, there is significant value as we think the worst is over.”
In the previous public health crisis of SARS back in 2003, which had similarly affected passenger numbers, ComfortDelGro’s share price had rebounded 75% in eight to 10 months after that pandemic.
“Long-term fundamentals are intact. We believe longer-term public policy support and environmental, social and governance (ESG) imperatives will continue to structurally favour public transport over private vehicle ownership,” she adds.
