ComfortDelgro – CIMB

SBS Transit to add 1,000 more buses for S$433m

Additional buses are part of fleet renewal programme, no changes to capex. SBST has announced that they will be adding 1,000 new buses from Jan 2013 to 2015 at a cost of S$433m. This announcement does not come as a surprise as the additions to the fleet are part of CD’s fleet renewal programme which started in 2006. Our capex assumption of S$500m for FY12 has factored in this increase in bus fleet. We think near term earnings impact could be minimal as current bus operation losses for CD accounts for about 1.5% of overall EBIT. Moreover, this scheme will be rolled out over a span of a few years therefore any earnings impact is expected to be spread out. Maintain BUY on CD, with DCF derived TP of S$1.75.

26% of new fleet funded through BSEP. SBST has announced that they will be adding 1,000 new buses from Jan 2013 to 2015 at a cost of S$433m. SBST has also commented that close to 90% of its bus fleet will be new by 2015, and its fleet size is expected to increase by about 13% to 3,400 buses, which will be its largest to date. Out of the 1,000 new buses, 260 of them will be funded under the Bus Services Enhancement Programme (BSEP), while SBST will fund the remaining 740.

Recall the BSEP announced during Singapore Budget. During the Singapore Budget in Feb 2012, it was announced that the government will increase public bus fleet by 800 buses over the next five years, and of the total 800 buses, 550 (69%) will be funded by the government while the remaining 250 (31%) will be provided by the public transport operators.

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