Author: tfwee

 

SBS Transit – BT

SBS Transit to operate Downtown Line

LTA shortens licence period to 15 years to boost contestability

The Downtown Line (DTL), the first stage of which will open in 2013, will be operated by SBS Transit (SBST) under the new rail financing framework.

 

 

 

The Land Transport Authority (LTA) yesterday announced that it has awarded the licence to operate the DTL to SBST with a shorter licence period to enhance contestability in the rail sector, with the operating assets to be owned by LTA.

The DTL is the first rail line put up for competitive tender under the new rail financing framework. The framework was announced by the government last year to inject greater contestability in the industry and achieve the Land Transport Master Plan's objectives by driving greater efficiency and service improvements.

Under the framework, the period for new Rapid Transit System (RTS) licences is being shortened from the existing 30-40 years to about 15 years. This means SBST's licence to run the DTL will end 15 years after the full completion of the line in 2017.

LTA says that a shorter licence enhances the level of contestability as the operator faces the prospect of competition at the end of its licence terms.

At the same time, LTA can refresh the licence conditions when the licence ends to allow for changes in the operating and business environment.

The new framework also makes the LTA, not the operator, the owner of the rail operating assets. The authority will decide on the replacement of and investment in trains and operating assets, thus allowing it to influence train carrying capacity and service levels more directly.

Also new is an annual Licence Charge that SBST as the appointed DTL operator will have to pay for 19 years – from 2013, when the first stage of the line is opened, until 15 years after 2017 when all three stages of the DTL are completed. Total payment during this 19-year period is expected to be $1.6 billion.

The DTL is a medium-capacity RTS that will facilitate direct travel from north-western and north-eastern Singapore to the Central Business District and Marina Bay. When fully operational, daily ridership is expected to be 500,000 initially and rising to 700,000 over time.

SBST, which operates three out of four public buses in Singapore, already runs the fully automated North-east Line (NEL) as well as the Sengkang and Punggol Light Rail Transit (LRT) systems.

The fully automated underground DTL will increase SBST's rail network from 40km currently to 82km, and its share of Singapore's total rail network will rise to 36 per cent.

But SMRT Trains remains the bigger rail network here with its North-South and East-West MRT Lines, as well as the recently fully opened Circle Line.

SBS Transit – BT

SBS Transit to operate Downtown Line

LTA shortens licence period to 15 years to boost contestability

The Downtown Line (DTL), the first stage of which will open in 2013, will be operated by SBS Transit (SBST) under the new rail financing framework.

 

 

 

The Land Transport Authority (LTA) yesterday announced that it has awarded the licence to operate the DTL to SBST with a shorter licence period to enhance contestability in the rail sector, with the operating assets to be owned by LTA.

The DTL is the first rail line put up for competitive tender under the new rail financing framework. The framework was announced by the government last year to inject greater contestability in the industry and achieve the Land Transport Master Plan's objectives by driving greater efficiency and service improvements.

Under the framework, the period for new Rapid Transit System (RTS) licences is being shortened from the existing 30-40 years to about 15 years. This means SBST's licence to run the DTL will end 15 years after the full completion of the line in 2017.

LTA says that a shorter licence enhances the level of contestability as the operator faces the prospect of competition at the end of its licence terms.

At the same time, LTA can refresh the licence conditions when the licence ends to allow for changes in the operating and business environment.

The new framework also makes the LTA, not the operator, the owner of the rail operating assets. The authority will decide on the replacement of and investment in trains and operating assets, thus allowing it to influence train carrying capacity and service levels more directly.

Also new is an annual Licence Charge that SBST as the appointed DTL operator will have to pay for 19 years – from 2013, when the first stage of the line is opened, until 15 years after 2017 when all three stages of the DTL are completed. Total payment during this 19-year period is expected to be $1.6 billion.

The DTL is a medium-capacity RTS that will facilitate direct travel from north-western and north-eastern Singapore to the Central Business District and Marina Bay. When fully operational, daily ridership is expected to be 500,000 initially and rising to 700,000 over time.

SBST, which operates three out of four public buses in Singapore, already runs the fully automated North-east Line (NEL) as well as the Sengkang and Punggol Light Rail Transit (LRT) systems.

The fully automated underground DTL will increase SBST's rail network from 40km currently to 82km, and its share of Singapore's total rail network will rise to 36 per cent.

But SMRT Trains remains the bigger rail network here with its North-South and East-West MRT Lines, as well as the recently fully opened Circle Line.

Singtel – BT

SingTel to inject S$1.89 bln assets into business trust

SINGAPORE – Singapore Telecommunications said it will to inject S$1.89 billion (US$1.56 billion) worth of infrastructure assets to the trustee-manager of NetLink Trust, a business trust owned by the firm.

SingTel is the sole unitholder of NetLink Trust, whose trustee-manager is CityNet Infrastructure Management. CityNet is a wholly-owned subsidiary of CitySpring Infrastructure Trust.

Singtel – BT

SingTel to inject S$1.89 bln assets into business trust

SINGAPORE – Singapore Telecommunications said it will to inject S$1.89 billion (US$1.56 billion) worth of infrastructure assets to the trustee-manager of NetLink Trust, a business trust owned by the firm.

SingTel is the sole unitholder of NetLink Trust, whose trustee-manager is CityNet Infrastructure Management. CityNet is a wholly-owned subsidiary of CitySpring Infrastructure Trust.

Land Transport – DMG

New MRT line extension on East-West Line

Tuas West Extension (TWE) to add 7.5km to East-West Line (EWL). Transport Minister Raymond Lim announced that the EWL will be extended from Joo Koon station to Tuas West area. The TWE is expected to be fully operational by 2016 with ~100k daily commuters. Coupled with costs related to new train purchase (13 new trains will be acquired), constructions of a new train depot and a new road viaduct, the entire TWE is estimated to cost ~S$3.5b. While the addition of TWE is already known beforehand, its track length and operational date differ from previous indication of 14km and 2015 respectively. Despite the shorter length of TWE and delay in operational date, we maintain our belief that the Singapore rail ridership is on course for a multi-year growth trend as population size increases. Maintain OVERWEIGHT on land transport sector.

Circle Line Stage 4-5 to be operational in 4Q11. In addition to TWE addition announcement, the Transport Minister also confirmed our belief that CCL Stage 4-5 will only be operational in 2H11 (exact announced period is 4Q11) while the CCL Marina Bay extension will be ready in 2012. In order to achieve breakeven for CCL Stage 1-5 and the CCL Marina Bay extension, we estimate the daily ridership has to be in excess of 481k. While both TWE and CCL track additions will undoubtedly lead to increase in ridership for SMRT, we think that SMRT's earnings could be pressured in the short to medium term due to advance hiring associated with the CCL 4-5 beginning 2HFY11. Hence, we are maintaining NEUTRAL on SMRT with TP of S$2.08.

Prefer ComfortDelGro (CD) within the sector. We continue to favour CD over SMRT due to the former's 1) greater overseas growth potential, and 2) cheaper valuation. In addition to margin improvements from ridership increase, we think CD will be looking at acquisition of more land transport companies in foreign markets in order to achieve overseas growth. This is evidenced from CD's recent bidding for operational rights of metropolitan buses in Adelaide. The bidding involve six contracts to run 850 government-supplied buses in Adelaide for eight years. Should CD succeed in the bidding, it will have its first city bus service in Australia. The result of the bidding will be out in Mar 2011 and operations are slated to commence in Oct 2011. We think CD remains undervalued, possibly due to excessive concern regarding CD's forex exposure in relation to its extensive overseas operations in UK & Ireland (9M10: 13% CD's EBIT), Australia (9M10: 16% CD's EBIT), and China (9M10: 12% CD's EBIT). However, given the approximately even contributions from the emerging (China) and developed nations (UK, Ireland, Australia), we reckon the chances of adverse forex movement from sustained strengthening of S$ against the local currencies of CD's overseas operations as low. Maintain BUY on CD with TP of S$1.85. Currently, CD is trading at 14x FY11F PATMI vs SMRT's 18x FY11F PATMI.