Land Transport – AmFraser

4Q09: Improved ridership momentum

• Total rail ridership grew 4% YoY in 2009, boosted by better 6% YoY growth in 4Q09. 4Q was the highest quarter in 2009, enjoying 177.2 million rides by commuters. In contrast, 3Q was the peak quarter – with 169.4 million rides – in 2008. In total, commuters took 676.8 million rail trips in 2009.

• MRT ridership fared a better 4% YoY growth in 2009 against 3% YoY growth in LRT ridership. LRT ridership accounts for an insignificant 4.9% of total ridership. Four MRT lines – North-South Line (NSL), East-West Line (EWL), North-East Line (NEL) and partially-opened Circle Line (CCL) enjoyed a combined 643.8 million trips by commuters. Three LRT lines – Bukit Pangjang, Sengkang and Ponggol – saw 33 million trips for the year.

• For 2009, ComfortDelGro’s (CD) rail ridership fared better than SMRT, despite reverse in 4Q09. Through 75.3%-owned Singapore Bus Service Transit (SBST), CD’s only MRT line (NEL) and two feeder LRT lines (Sengkang and Ponggol) to NEL, saw a combined 6% YoY growth to 135.6 million trips in 2009. LRT accounts for 12% of this. In 4Q09, CD’s rail ridership grew 5% YoY to 35.7 million.

• Pick up in momentum for 4Q09 at SMRT pulls rail ridership growth to 4% YoY for 2009. SMRT saw a combined 137.3 million rides on its three MRT lines in 4Q09, representing 6% YoY growth, higher than the 2-3% YoY growth in the earlier quarters.

• Overall, incremental benefits from new Circle Line has not flowed through in 2009. Despite opening of a new MRT line since May 2009, 4% YoY growth in rail ridership for 2009 was much lower than the 12% YoY growth for 2008. As only one out of five stages of CCL is in operation so far, and CCL is more of a connecting line (an orbital line) to improve travel times and convenience, we believe more incremental benefits will flow through in the longer term from luring more commuters to take public transport when later stages of CCL are progressively opened. At the same time, while a slower economy dampened rail rides to some extent in 2009, a continued growth (+0.3% YoY) in car population also had an impact.

• In public scheduled bus services, CD’s dominant bus operations continued to fare poorer than SMRT’s in 4Q09. Overall bus ridership fell 1% YoY in 2009 to 1,115.5 million trips. SBST saw an improved flat 4Q09 over year ago which helped bring its full year to a 2% YoY fall to 827.9 million rides. SMRT also saw an improved 1% YoY growth in 4Q09, which helped bring full calendar year to a flat performance over 2008.

• On balance, ridership numbers released till December 2009, bodes better for CD. While CD’s bus ridership for FY2009 is a fall from 2008, this came in 1% higher than our forecast. At the same time, CD’s rail ridership came in 0.4% below our FY2009 forecast. Singapore bus accounts for a larger 20% of CD’s revenues, while rail accounts for a smaller 4%.

• SMRT’s 3QFY10 (YE March) reported MRT ridership of 137.3 million is 1% lower than our estimate. But on upside, bus ridership totalling 71.7 million (Dec 2009 estimated) is 2% above what we had factored in. However, the net effect is on the downside as MRT operations contribute 54% to revenues while bus accounts for 22%.

• Preview: Modest cut to SMRT’s FY10 estimates possible – but would not likely have drastic impact on rating. SMRT reports 3QFY10 (March) results 27 January after trading hours. CD reports FY09 (Dec) on 10 February. We reckon minor adjustments on ridership revision per se, could represent a 2% downward bias to SMRT’s fFY10 (March) earnings.

• Positive note for SMRT, we will start to see maiden contributions from Shenzhen ZONA Transportation Group in 3QFY10. The acquisition of ZONA – its first overseas foray in public transport services – was completed on 30 October 2009. While early contributions is insignificant in the near-term, SMRT expects this to be material within five years.

• CD still presents 15% upside to fair value of S$1.89 – maintain BUY rating. SMRT has appreciated 9% on our buy rating since our last report on 2 November 2009. Our current rating pends our results review report.

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