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SBS Transit, one of the most well-known bus companies in this region, began rail operations in 2003. SBS Transit began running its light rail system in Sengkang in 2003, and its MRT system, the North East Line (NEL), began operations in the same year. The Punggol LRT System was launched by SBS Transit in 2005.
SBS Transit (SBST) reported an 11.9 percent increase in half-year net profit to S$36.5 million, boosted by government subsidies that helped cushion reduced ridership due to the pandemic, in a business update on Thursday. It issued an interim dividend of 5.75 Singapore cents per share, with a payout ratio of 49.2%. The group’s revenue for the first half of FY2021 increased by 6.2 percent to S$640.9 million. SBST’s public-transport services revenue increased 5.9% to S$621.4 million in the quarter, while revenue from other commercial services increased 18.1 percent to S$19.4 million. Operating profit increased by 18.5% year on year to S$38.2 million, although it would have been just S$3.6 million if not for the Singapore government’s Job Support Scheme, according to SBST.
On August 13, a bullish reversal triangle formed on the chart of SBS. The bullish pattern formed after the company announced a 12% increase in earnings and proposed a $0.0575 dividend. The good news will support the stock price in the near term.
After the announcement of the positive earnings figures, the chart of SBS broke out of the Ichimoku Kinko Hyo indicator. The Ichimoku Kinko Hyo indicator was developed by the Japanese and consists of a formula composed of 5 indicators. The indicators are not only able to identify the uptrend of the chart, but also show the strength of the uptrend. The chart turned bullish on August 13 when the price broke out above the Ichimoku cloud. Moreover, a golden cross between the Kijun-sen and Tenken-sen indicators confirmed the bullish nature of the breakout.
However, it should be noted that the Kijun-sen and Tenken-sen indicators were below the cloud and that a “bearish reversal” occurred at the end of the Ichimoku cloud. These are signs that the chart is not very bullish in the short term. In the short term, we could see a sideways consolidation, or the upside target might not be too high.
Given the limited strength of the uptrend, we set the initial price target for the breakout at $3.15, which is a 50% projection from the base of the triangle breakout. Traders intending to buy the stock at the current price can realise an upside potential of 3.2%.
The stop loss should be set at $2.96. This is a good trade setup with a risk-reward ratio of just over 100%.
Looking at the bigger picture, $3.26 could be the next possible price target for the stock. The 100% projection from the base of the triangle coincided with the top of a larger triangle pattern that had formed over an 18-month period. However, it will take many months for the price to reach this level. For long-term investors, it is worth holding on to this stock as the dividend yield has historically been over 3%.
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