Since the Ukraine-Russia Conflict, Inflation and many other factors are pulling the market down, I decided to go bargain hunting! I personally love cash cow companies that produces high free cash flow. And since I recently moved to Singapore (Been here a month now), I have been looking into singaporean companies.
For those who dont know, free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet.
I came across this 2 very fundamentally solid Singapore Companies. $COMFORTDELGRO CORPORATION LTD(C52.SI)$and $SBS Transit Ltd.(SBSTF)$
ComfortDelGro is a land-transport company based in Singapore. It has expanded significantly and now operates in seven countries and has a global fleet of about 40,000 vehicles. ComfortDelGros businesses include bus, taxi, rail, car rental and leasing, automotive engineering services, inspection and testing services, driving centres, non-emergency patient transport services, insurance broking services and outdoor advertising.
Apart from being the market leader in Singapore, ComfortDelGro has a significant overseas presence. The Group’s operations currently extend from the United Kingdom and Ireland to Australia, Malaysia, as well as across nine cities in China, including Beijing, Shanghai, Guangzhou, Shenyang and Chengdu.
SBS Transit is a subsidiary of Comfort Del Gro. SBS Transit is a leading bus and rail operator in Singapore and the operate many trains such as the North East Line and the Downtown Line.
Key Takeaways on ComfortDelGro Financials:
●Compared to companies like $Grab Holdings(GRAB)$or Uber, ComfortDelGro is profitable and has grown their Free Cash Flow from 240M in 2016 to 434M in 2021. Thats a 5Y CAGR of 12.58%!
●They have given out a dividend yield of 3% consistently for the past 5 years.
●Earnings have taken a significant impact in 2020 and 2021 as the whole world was on lockdown and no one could go out. However they still made a free cash flow of 284M and 434M respectively.
●Earnings are very stable and solid as they have a solid customer base and a moat on their platform.
●Their balance sheet is extremely healthy, they have a debt-to-equity ratio of only 19.7%. They have 615M in Debt, however, they have 919M of Cash on their balance Sheet! Debt has also gone down in the past few years.
●Using a discounted Free Cash Flow Model, my intrinsic value calculation using 15% discount rate and 3% growth rate, this company is worth 4.82B. If u remove the 919M of cash from its 2.82B market cap, it is currently trading at 60% undervalued price!
Key takeaways on SBS Transit Financials:
●Free Cash Flow has grown from 36.63M in 2016 to 191.47M in 2021. FCF has grown at at CAGR of 39% a year!
●Dividend payout has grown from 11M to 38M in 2021. A stable 3% dividend Yield.
●60% of Singapore's population uses public transport as its the most efficient and cheapest form of transportation. Therefore their earnings have been very stable and solid.
●Balance sheet is extremely healthy, with only 15% of Debt-to-equity. They even have 204M in cash, which is about 20% of their market cap.
●Using a discounted Free Cash Flow Model, my intrinsic value calculation using 15% discount rate and 1% growth rate, the business is worth 1.59B. This shows a 43% undervalued intrinsic value to its current market cap.
Bottom line:
This 2 companies are 2 cash cows that will providexceptional dividend in the upcoming years. I also believe ComfortDelGro will continue to expand their operations and overtake Grab and Uber as the dominant market leader due to their profitability and potential.
Are you guys adding this 2 companies into ur portfolio? Let me know what u think!
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