Month: July 2008
ComfortDelgro – BT
Taxis to add 30-cent diesel surcharge per ride from Thursday
COMFORTDELGRO will introduce a diesel surcharge of 30 cents on the cost of all taxi rides from next Thursday due to rising diesel prices, and yesterday’s announcement by the market heavyweight led to SMRT Taxis following suit. ComfortDelGro operates the biggest fleet of taxis in Singapore with about 14,000 vehicles, or almost two-thirds of the total 22,000-plus cabs. SMRT is No 2 with about 3,000 taxis.
ComfortDelGro said that in the last six months, the net pump price of diesel here has risen by more than 50 per cent to $1.83 a litre on the back of all-time high global oil prices.
‘For the last six months, we have been absorbing a large part of the increase in diesel costs so that our drivers can enjoy a low rate of just $1.19 per litre of diesel,’ said Yang Ban Seng, CEO of the land transport giant’s taxi business. ‘But even at this subsidised rate, our drivers are still paying about 40 per cent more than what they were paying six months ago before the fare revision and the indications are that oil prices will continue to remain high.’
ComfortDelGro, which sells diesel to its drivers, said it incurred a $6.3 million loss on such sales in the first three months of the year alone. The company added that the diesel surcharge will increase drivers’ incomes by $9 per day, assuming each taxi makes about 30 trips daily. The surcharge, which will go to the driver, is a temporary measure to offset surging diesel costs. It will be removed when diesel prices fall back to $1.19 per litre, the market price on Dec 17, 2007.
Even CNG-powered taxis are likely to tack on the 30-cent surcharge. Smart Automobile, which has 180 cabs that run on compressed natural gas (CNG), said this is because the price of CNG has also risen as it tracks the price of high sulphur fuel oil. ‘The price of CNG is currently $1.59 per kg, before a 12 per cent discount for our drivers,’ said managing director Johnny Harjantho, whose subsidiary Smart Energy operates a CNG refuelling station. ‘In February, it was only $1.28 per kg.’
Smart, which also has about 650 diesel taxis, is one of two operators of CNG taxis, along with Prime Taxis. They will be joined later this month by SMRT, which will roll out Hyundai Azera CNG cabs.
SPH – BT
SPH net profit dips 15.6% in Q3; recurring earnings up 26%
Net investment income falls 66% amid volatility in financial markets
SINGAPORE Press Holdings (SPH) turned in a 26.2 per cent year-on-year jump in recurring earnings to $135.1 million for the third quarter ended May 31, but a drop in investment income resulted in a 15.6 per cent fall in net profit to $133.4 million.
The rise in profit before investment – which represents recurring earnings from the media and property businesses, including profits from the Sky@eleven development – came on the back of higher revenue contribution from the newspaper and magazine segment and the Sky@eleven project.
Volatility in the financial markets continued to exact its toll on investments, resulting in a 65.9 per cent decline in net investment income to $25.7 million. The drop in investment income was due mainly to higher profit on sale of investments last year. In addition, last year included income from the capital reduction exercise undertaken by an investee company, Mobile One.
The media group’s operating revenue rose 19.5 per cent to $344.4 million for the quarter. Revenue from its core newspaper and magazine operations rose 5.1 per cent to $268.9 million, with print advertisement revenue remaining the growth driver, jumping 6.3 per cent to $207.9 million.
In the property segment, revenue more than doubled to $67.3 million from $26 million a year earlier – with a $38.1 million contribution from Sky@eleven and a $3.1 million increase in income from rental and related services from Paragon. Property yield from Paragon is expected to be maintained at above 4 per cent based on an upward revaluation of the shopping centre, at $2 billion.
Total operating expenses went up by 15.6 per cent to $212.7 million. Property development costs for Sky@eleven accounted for $10.8 million, while staff costs were up $10.6 million or 13.8 per cent mainly due to increased headcount, annual salary increment and higher variable bonus provision. Headcount at end-May reached 3,874, up from 3,684 a year ago, as the group intensified its efforts to expand into new media and magazine businesses.
Other operating expenses increased $6.4 million or 15 per cent in tandem with the increase in business activity and inflationary pressures.
On a nine-month basis, net profit came to $344.9 million, a drop of 8 per cent from a year ago, while operating revenue was 17.7 per cent higher at $954.5 million. Profit before investment income, or recurring earnings, climbed 26.6 per cent to $373.4 million.
Q3 earnings per share (EPS) came in at eight cents, down from 10 cents, while EPS for the nine months fell to 22 cents from 24 cents.
Commenting on the outlook for the next 12 months, chief executive officer Alan Chan said: ‘The Singapore economy is forecast to grow at a more moderate pace in 2008. Advertising revenue, which has registered commendable growth and remained resilient so far, is expected to perform in tandem with the economy. Newsprint prices, which have seen sharp increases, are poised to rise further due to escalating production costs as well as supply and demand imbalances.’
He also said that the performance of the property segment continues to be underpinned by profit contribution from Sky@eleven and strong rental income growth from Paragon.
‘Barring unforeseen circumstances, the directors expect the recurring earnings for the current financial year to be better than the previous financial year.’
Shares of SPH ended one cent lower at $4.18 yesterday.
Transport – BT
Through fare adjustment may negate fare hike
Transport firms cleared to apply for bus, train fare increase of up to 3%
PUBLIC transport operators’ (PTOs) revenues may be hurt despite a fare review that allows a maximum fare adjustment of 3 per cent for 2008 because of the introduction of distance-based through fares.
Yesterday, the Public Transport Council (PTC) announced that public transport operators can apply for an increase in bus and train fares of up to 3 per cent. This was arrived at after a review of the fare adjustment formula, which PTC has tweaked slightly.
The formula, unveiled in 2005, is pegged to three macroeconomic factors – the consumer price index (CPI), the average monthly earnings (WI) and the productivity extraction, which is a measure of productivity gains.
The original formula was 0.5 (change in CPI) + 0.5 (change in WI) – 0.3 per cent, where 0.3 per cent was the productivity extraction from 2005 to 2007.
For 2008-2012, PTC says the relative weights for changes in CPI and WI remain unchanged but the productivity extraction component is now 1.5 per cent. So the new formula is 0.5 (change in CPI) + 0.5 (change in WI) – 1.5 per cent.
PTC also announced that as part of the Land Transport Masterplan, distance-based through fares will be introduced to facilitate more seamless transfers on the public transport system.
Currently, a commuter who transfers between buses, or between bus and MRT, incurs a ‘transfer penalty’ when taking the subsequent vehicle because of the additional ‘boarding charge’.
But with the introduction of through fares, this penalty – about 35 cents now – will be reduced in two stages over 2008 and 2009, and commuters will only have to pay for the extra distance travelled.
The aim is to avoid penalising commuters who make transfer journeys, which can be faster than a single direct trip, and give them more route choices.
But depending on how PTC apportions the cost of reducing this ‘transfer penalty’ between operators and commuters, it may affect the bottom line of the two listed PTOs – SBS Transit and SMRT Corp. That will only be known in September because the PTOs have to first submit their applications for a fare hike in August. PTC will make known its decision in September, and the new fares will take effect in October.
Through fares could result in lower fare revenues for the PTOs and negate some of the benefits from a fare increase, says one industry analyst.
‘Even with a fare hike, the through fare adjustment may neutralise any potential revenue increase for the transport operators,’ he says.
He adds that it all depends on how many commuters start making transfers. Based on current travel patterns, four in 10 adult EZ-Link commuters make transfer journeys on a weekday. That number is expected to rise significantly with the introduction of through fares.
‘Under the new system, people who make transfers may pay lower fares, while those who don’t make transfers will pay more because of the 3 per cent fare increase,’ says the analyst.
‘Total fare revenues will depend on how many commuters make up each group.’
But there could be a silver lining in all this. He says: ‘While this may not seem like good news initially, lower fares could attract more people to use public transport, thus increasing the overall ridership and fare revenues.’
ComfortDelgro – BT
Comfort DelGro unit to acquire Custom Coaches
Deal will give it 35 per cent share of the Australian bus building market
COMFORTDELGRO Corporation’s Australian subsidiary, ComfortDelGro Cabcharge (CDC), has entered into a memorandum of understanding for the acquisition of bus builder Custom Coaches, which will give CDC a 35 per cent share of the Australian bus building market.
CDC was set up in 2005 as a joint venture between ComfortDelGro and financial services provider Cabcharge Australia.
The proposed acquisition will act as a base for the group when it opens its new manufacturing plant at Rutherford, Hunter Valley in early 2009.
The acquisition is subject to due diligence, which is expected to wrap up in about a month’s time.
‘If this goes through, it will help us get a foothold until the building plant goes into operation,’ said ComfortDelGro spokesperson Tammy Tan.
Custom Coaches has bus building factories for fabricated stainless steel buses in Sydney, Adelaide and Gold Coast.
About 44 per cent of the group’s turnover currently stems from its overseas operations.
However, the group had stated earlier this year that is targeting 70 per cent of total turnover to stem from overseas operations within five to seven years.
Since its formation, ComfortDelGro, the world’s second largest land transport company, has adopted an aggressive overseas expansion strategy and currently has operations in seven countries – Singapore, China, the United Kingdom, Ireland, Australia, Vietnam and Malaysia.
Rising fuel costs caused the group’s net profit for the first quarter ended March 31 to drop 9.4 per cent to $50.2 million.
Revenue increased 5.8 per cent to $753.5 million, on the back of strong contributions from both its local and overseas operations.
ComfortDelGro’s Q1 earnings per share was 2.41 cents, down from 2.67 cents last year.
First-quarter turnover for the bus business rose 5.7 per cent to $378.6 million due to higher contributions from the group’s operations in Australia and China.
Overseas bus operations accounted for 59 per cent of total group bus turnover.
ComfortDelGro MD and group CEO Kua Hong Pak had said previously that the ‘various operations around the world remain sound, with most showing good growth at the top line’.
ComfortDelGro shares closed at $1.47 each yesterday, up by three cents.
SingPost – BT
SingPost HQ up for sale with $850m tag
Terms of any leaseback deal could determine price it fetches: observers
THE buzz created by recently unveiled plans to develop the Paya Lebar area into a commercial hub may get a boost from Singapore Post’s planned sale of its landmark headquarters building next to Paya Lebar MRT Station.
BT understands the listed group has launched an expression of interest for the 14-storey building and the price tag is said to be around $850 million based on the existing use of Singapore Post Centre.
SingPost is expected to lease back the space it currently occupies – which is roughly half the building’s one million sq ft net lettable area – for both its corporate office and operations, including the mail processing centre.
The rest of the property is leased to a mix of retail and office tenants, including NTUC FairPrice, Kopitiam, Barang Barang, This Fashion, HSBC Insurance, Northwest Airlines and Symantec Corporation.
CB Richard Ellis is understood to be handling the sale of SingPost Centre.
The current approved use for the site is around 60 per cent industrial and 40 per cent commercial, based on an earlier report.
However, potential investors may seek the authorities’ approval to convert the use to full commercial, to optimise the site’s commercial zoning under both the 2003 and 2008 (draft) Master Plans.
A differential premium would have to be paid to the state in exchange for realising the enhancement in use.
SingPost Centre’s existing gross floor area of 1.48 million sq ft has already tapped the 4.2 maximum plot ratio allowed under the two Master Plans.
The property is on a 352,389 sq ft site with a remaining lease of about 73 years. The 14-storey building, which also has three basement levels (mostly for retail), has 587 carpark lots.
Industry observers say the terms of SingPost’s leaseback arrangement with the potential buyer will be a critical factor in determining the price the building fetches.
Banks have also tightened lending for property acquisitions but core funds and core-plus funds, which rely less on debt and more on their own equity when making property purchases, are still interested in making acquisitions.
BT also reported recently that some of the big overseas funds which have been buying office properties in Singapore in the past few years are now also looking at industrial, logistics and business park assets, which offer higher yields.
Against this backdrop, SingPost Centre’s potential buyer may well continue with the existing industrial/commercial use of the property.
SingPost has also been selling some of its smaller properties, for instance, at Clementi Central, Boon Lay, Marine Parade and Hougang South. The group is still left with a dozen properties, including two in the prime districts – Tanglin and Killiney Road post offices.