Month: January 2008
Transport – BT
Transport Central – on its way to wean you off cars
LTA will play central planner; more operators in bus industry to raise efficiency
In moves that will nudge car owners to hop onto public transport for a quick and comfortable ride, the government has unveiled plans to integrate bus and rail services and to open up the basic bus service industry to more operators.
The changes were announced yesterday by Transport Minister Raymond Lim and are part of a land transport review which seeks to make public transport the preferred mode of travel.
Among the initiatives being rolled out:
The Land Transport Authority (LTA) will take a centralised bus planning role from end-2009.
There will be more bus lanes and an extension of the full-day bus lane scheme.
On the road, buses will have priority over other vehicles when exiting bus bays and at major junctions.
After 2009, the bus service industry will be gradually opened up and routes tendered out.
A review of the rail network, cars and the road system was also undertaken and the respective details will be announced over the next couple of weeks.
Yesterday, Mr Lim said that the land transport review sought to answer the key question: What will it take for the majority of Singaporeans to choose the bus or MRT over the car? With the current 8.9 million daily journeys today set to jump to 14.3 million by 2020, making public transport the centrepiece of Singapore’s land transport system is crucial.
‘We will invest in quality, not just system capacity,’ he said. ‘We need to ask: Can people get to a train station or bus stop quickly and comfortably?’
More competition – but of a different kind – is seen as a key element in this strategy.
By next year, buses may not just be adorned with the familiar SBS Transit or SMRT colours. Competition will be introduced to raise efficiency and service levels. There are about 3,700 public buses today, of which 2,900 are SBST‘s. Mr Lim said that economies of scale are limited for bus operators with a fleet size above 500 buses.
‘Our intention is to introduce competition ‘for’ the market, where operators compete periodically for the right to provide a package of bus services designed by the LTA,’ he explained. ‘This is different from competition ‘in’ the market or head-on competition for market share, which would be detrimental to an integrated public transport system where the emphasis is on cooperation to grow the overall pie.’
The LTA could not say how many new operators are expected to enter the field but currently, there are only a handful of private bus operators with a fleet of 50 buses or more. Ironically, the market leader is ComfortDelGro Bus, a subsidiary of ComfortDelGro Corp, the parent company of SBST, with more than 300 buses.
But as with other private bus operators such as Woodlands Transport and Yeap Transport, its mainly school and tour buses are not suited for basic bus services.
‘These private companies will have to invest in new buses if they want to tender for the routes,’ said one bus company executive. ‘But they have also been known to cooperate among themselves as joint ventures, so we will have to see.’
To solve the problems of waiting time, travel time and overcrowding, the government wants to make the hub-and-spoke system seamless. This model, using buses to ferry commuters to a hub from which they will continue their journey on another bus, is more efficient than a direct bus service.
‘We need to improve the connectivity of our hub-and-spoke system, in particular, the integration between the feeders, trunk buses and MRT,’ said Mr Lim. ‘Only then can we ensure seamless transfers and make the whole public transport journey as convenient as possible.’
Currently, the two public transport operators – SBST and SMRT Buses – plan bus routes based on commercial considerations with minimum service obligations. As part of the new people-centric approach, LTA will become the central planner. By 2015, the target is for 80 per cent of public transport commuters to complete their journeys within an hour – up from 71 per cent today. And by 2020, the gap between public transport and car journey times will be reduced, with the former not taking more than 1.5 times the latter – down from the current 1.7 times.
To shorten waiting time for buses and reduce crowding, at least 80 per cent of bus services must be run at peak frequencies of 10 minutes or less by August 2009, compared with 15 minutes today.
TELCOs – BT
StarHub seen gaining with portability
STARHUB has emerged as the top pick among Singapore telcos, as the telecom sector prepares for the new regime whereby customers will be able to switch mobile-phone operators while keeping their established phone number, says Cazenove & Co.
The research house is also bullish on MobileOne (M1), but recommended an ‘underperform’ on SingTel.
At a briefing yesterday, analyst Lai Voon San said he expects the new system, called mobile number portability (MNP), to dominate the telecom sector here, with many average consumers switching to StarHub given the bundled discount they can get from the latter’s strength in pay-TV.
‘We think that StarHub can grab an extra 10-15 per cent market share on top of what they already have now,’ he said. Customers will be offered incentives to have the same supplier for their mobile, pay-TV services and broadband telecommunications.
Mr Lai believes that SingTel is likely to be the biggest loser as it has the most post-paid subscribers at present. MNP is expected to be introduced here in May.
Mr Lai is similarly bearish on SingTel’s pay-TV service, saying: ‘No matter how much money they throw into it, it will be years before they make a return.’ He sees SingTel’s project as only driving up the price of content for consumers.
He said M1 stands out for its forecast dividend yield of 9.7 per cent this year – the highest in Cazenove’s telco universe. The firm’s earnings are relatively stable, Mr Lai said.
Looking ahead, he said that the next generation national broadband network (NGNBN) should gain further momentum through the year ‘as decisions are expected over who will build the network’.
While this could hurt incumbents SingTel and StarHub, the latter’s pay TV dominance will support its competitive outlook with SingTel again the most vulnerable.
‘We expect bundling to gain momentum as SingTel tries to compete against StarHub and offer more discounts,’ he added.
Cazenove sees the telecom sector in Asia-Pacific as a safe haven amidst the market volatility this year, and is expected to outperform the other sectors.
The major themes across the region include growth in wireless subscriber, regulatory changes and regional expansion of assets.
China is expected to add 110 million wireless subscribers, while Indonesia will see another 31 million new ones.
Mr Lai sees policy implementations and changes ahead for 2008, including additional licences in places like Thailand and Indonesia, MNP in Singapore and Malaysia, and 3G rollouts in China and Thailand.
In addition, Cazenove expects more company mergers and acquisitions (M&A) as telcos expand their areas of operation. Telekom Malaysia’s de-merger of its regional assets is likely to bring in a strategic partner which will further highlight M&A activity. Others like SingTel remain active buyers.
Cazenove has set fair values of $3.50 and $3.35 on StarHub and SingTel respectively.
SPH – CIMB
In an enviable position
• Positive momentum on newspaper adex set to continue. Newspaper adex grew by 14.6% yoy in November 2007 which should support a full year growth of 10%, the fastest growth since 2004. We expect newspaper adex to enjoy multiyear growth stemming from a buoyant domestic economy as Singapore transforms itself into a key global destination.
• Raising ad rates. In view of the positive outlook, SPH has raised its display and classifieds ad rates by 2.2-7.5% for the Straits Times, the Sunday Times and Business Times with effect from 1 January 2008.
• Revising earnings and dividend estimates. We have raised our earnings estimates for core media operations but this is offset by a cut in investment income estimates, resulting in an earnings reduction of 1-4% for FY08-09. However, dividend estimates have been raised by 6-8% on the back of higher payout ratio assumption given robust prospects from recurring operations.
• Maintaining Outperform with higher target price of S$5.20. Our sum-of-the-parts based target price is raised slightly from S$5.10 as we upgrade our earnings estimates for the core media operations. We believe that SPH’s defensive earnings as Singapore’s dominant print media player and a solid 7.6% prospective yield positions the stock to outperform the index, particularly in a riskaverse market environment.
Thomson Medical – Phillip
Welcome 2008
Recently, we visited Thomson Medical Center. After we obtained further updates from Thomson’s management, we found that Thomson’s fundamentals continue to remain sound. The average number of babies delivered every month at hospitals managed by Thomson over the past four months has surpassed 700, compared to the average deliveries of 639 in FY07. We believe the growth of child deliveries in Thomson will support well Thomson’s top line and bottom line growth in 2008. Due to weak market conditions, we have seen Thomson’s share price slide to S$0.62, which provides a good entry point to buy into this counter. However, we only recommend long- term investors to take a position due to the short term uncertainty of market.
Postponement of upgrade of two more wards. As the Group has seen increasing number of child deliveries, it could postpone the announced upgrading of two wards to 2H08. As there are just 1.5 months left in 1H08, we would expect that 1H08 will be less affected by upgrading and thus is likely to show a better than expected growth in 1H08. Overall, we retain our target for FY08 and FY09.
Reputable winner of the Singapore Prestige Brand Award 2007. Thomson has won the Singapore Prestige Brand Award once again in year 2007, the award honoring home-grown brands that have been established between 6 to 30 years ago. This recognition demonstrates outstanding performance in the communication and marketing of Thomson’s brand, and has explained why Thomson has taken a bigger bite of the shrinking pie.
Valuation! We maintain our forecast for FY08 and FY09 with net profit SGD 10.5 mln and SGD 12.0 mln. We still peg our PE at 24x FY07, and reach a fair value of 78.5 cents. Given that healthcare sector is more defensive during economic downturns, we feel it is worthwhile to consider Thomson during this time. Re-iterate Buy!