Category: SBSTransit
Transport – BT
Fare cut to cost SBST $42.7m, SMRT $37.3m
THE 4.6 per cent cut in bus and train fares will cost SBS Transit $42.7 million over 15 months, while the corresponding figure for SMRT Corp is $37.3 million, the two companies said yesterday.
On Thursday, the Public Transport Council announced that the fare reduction package would cost the two public transport operators about $80 million from April 1, 2009, to June 30, 2010. But both SBST, the dominant bus operator, and SMRT, which runs Singapore’s biggest rail network, said that they would only reveal the impact to their fare revenues the following day.
The fare rebate, starting on April 1, 2009, will allow adult commuters to save from two to 14 cents for a direct journey or a journey with one transfer.
In a statement, SBST said that the temporary relief measures will cost it ‘$42.7 million for the 15-month period’ – more than the $21.5 million it is expected to receive from last month’s Budget.
SBST chief operating officer Gan Juay Kiat said: ‘We hope that by reducing fares by an average of 5.1 per cent during these tough times, commuters will be able to get some relief from cost pressures.’
The 5.1 per cent figure is obtained after averaging the reductions in fares for SBST’s basic bus and train services, as well as its non-basic or premium bus services.
SMRT also said that it would give commuters further rebates on its premium and express bus services. It said that together with the discounts on these non-basic bus services and a $300,000 donation announced in January to help needy commuters, ‘these measures by SMRT to help commuters reduce their transport costs and cope with the economic downturn amount to $37.3 million in the next 15 months’.
‘This amount exceeds the savings SMRT will receive from the government budget,’ said SMRT in a statement.
‘We have reduced train and bus fares to help commuters of basic services cope with the downturn,’ said SMRT Corp president and CEO Saw Phaik Hwa.
Transport – DBS
Fare cuts
PTC announced a fare reduction of 4.6%. This is inclusive of a 2cents fare rebate and a 10cents increase in transfer rebate. We were hoping for a 2-3% cut instead. The total cost to transport operators is $80m, of which savings from the Budget measures will cover $37m. We trimmed our profit forecasts by 2% – 6%. Our TP for SMRT is now $1.70. Downgrade to Hold on limited upside.
Overall fare reduced by 4.6%. The Public Transport Council (PTC) announced yesterday that there would be an overall bus and train fares reduction of 4.6% from 1 April 2009. The fare reduction comprises of a fare rebate of 2cents per trip and a 10cents in transfer rebates.
Total costs to operators is $80m. The fare reduction will costs the public transport operators about $80m over a period of 15 months from 1 Apr 09 to 30 Jun 2010. The 2cents fare rebate amounts to $52m, of which about $37m are savings from the Government Budget 2009. The 10 cents increase in transfer rebates is estimated to cost operators $28m.
Trimming profit forecasts. We trimmed our forecasts for SMRT (FYE Mar 10) and ComfortDelGro (CDG) by 6% and 2%, respectively. The adjustment to SMRT is larger as it derives almost all its revenue from Singapore. CDG, on the other hand, derives c.57% of its profit outside of Singapore.
Downgrade SMRT to Hold. Our TP for SMRT is adjusted down to $1.70 (still pegged to 14x FY10F earnings), equating to a 6% upside. As such, we downgrade SMRT to Hold. Whilst we like SMRT for its defensive features, we would prefer to accumulate at a lower level (c.$1.40).
Maintain Buy for CDG. We maintain our Buy call for CD for its international exposure and relatively limited impact from this round of fare cuts. Our TP for CDG is trimmed slightly down to $1.55 (from $1.57).
ComfortDelgro – BT
ComfortDelGro’s full-year profit falls 10% to $200m
The land transport firm says operating profit slipped 17% to $278m
HIGHER operating expenses put the brakes on ComfortDelGro’s net profit for the full year ended Dec 31, 2008, causing it to fall 10.3 per cent to $200.1 million, even as revenue grew 3.6 per cent to $3.13 billion.
The land transport giant said operating profit slipped 17.3 per cent to $278 million due mainly to the higher cost of fuel in the first three quarters of the year. For the full year, fuel and electricity costs jumped 31.8 per cent to $285.4 million.
Together with pricier fuel, higher payment for cashless transactions on increased turnover and a rise in taxi driver benefits pushed total operating expenses up 6.2 per cent to $2.85 billion. Earnings per share fell to 9.59 cents from 10.73 cents.
A final one-tier tax-exempt dividend of 2.4 cents per share has been proposed. In addition to the normal interim one-tier tax-exempt dividend of 2.6 cents paid earlier, the total dividend for 2008 would be five cents per share if the final dividend is approved.
ComfortDelGro said the operating profit of its overseas businesses as a proportion of total group operating profit rose to 47.3 per cent in 2008 from 45.8 per cent the year before.
Turnover for its bus business slipped 0.4 per cent to $1.5 billion because of the translation effect of the weaker British pound and Australian dollar.
Still, the UK operations accounted for over 71 per cent of total overseas bus turnover, while Australia made up 23 per cent. China’s share was 6 per cent.
In Singapore, listed unit SBS Transit’s (SBST) net profit for the full year ended Dec 31, 2008 fell 18.9 per cent to $40.58 million, hit by higher fuel and electricity costs, as well as lower interest income on investments. But SBST’s revenue grew 8.9 per cent to $729.6 million due mainly to higher bus and rail fare revenue, along with higher rental income.
ComfortDelGro’s taxi business recorded a 2.5 per cent hike in turnover to $945.3 million. In Singapore, turnover from taxis rose 10.3 per cent to $614.7 million on an increase in fleet size and cashless transactions.
But turnover from its overseas taxi operations fell 9.4 per cent to $330.6 million, mainly due to a 19 per cent decline in UK turnover to $209.3 million from the weaker pound and a drop in demand from corporate accounts. This was partially offset by increases in China and Vietnam.
The rail business chalked up a 15.7 per cent increase in turnover to $101.5 million on higher ridership for the North-east MRT Line and the Punggol and Sengkang LRTs. This is the first time turnover has crossed the $100 million mark.
Listed unit Vicom saw net profit for the full year ended Dec 31, 2008 rise 17 per cent to $15.8 million, thanks to improved volumes from its core businesses of vehicle inspection, and testing and inspection services.
The vehicle inspection unit of ComfortDelGro said total revenue rose 14.1 per cent to $73.8 million on higher revenue, with the significant increase in the testing and inspection services coming from the construction sector, marine and offshore, and oil and gas.
Looking ahead, ComfortDelGro managing director and group CEO Kua Hong Pak said 2009 will be ‘unprecedented and very challenging’. ‘Our focus is on how business trends are developing so as to better position ourselves.’
Transport – BT
Public transport stocks seen as beneficiaries
PUBLIC transport stocks are looking good as key beneficiaries of a slew of measures in the latest Budget.
The recessionary mood may also result in higher passenger numbers as people choose more affordable public transport over private transport, analysts say.
Yesterday, ComfortDelgro gained 11 cents or 7.9 per cent to $1.50 and SMRT edged up one cent or 0.6 per cent to $1.60. SBS Transit, the rail and bus arm of ComfortDelGro, rose five cents or 2.9 per cent to $1.78.
Transport-friendly measures in last week’s Budget include a 30 per cent road tax rebate and a one-year waiver of the diesel tax for unhired taxis.
In a report issued yesterday, CIMB-GK analyst Lawrence Lye keeps his ‘overweight’ rating on the public transport sector.
‘We continue to like the sector for its relative defensiveness amid a tough recession, given that people will need to move about in the most affordable way, supporting ridership,’ Mr Lye said. ‘The 40 per cent property tax rebate should also benefit SMRT, which has net lettable space of over 26,000 sq metres.’
According to Government estimates, the road tax rebate will save taxi companies about $7 million and the diesel tax waiver will provide savings of about $6 million. This will benefit taxi hirers facing flagging demand.
Both ComfortDelgro and SMRT are in discussions with the Public Transport Council (PTC) to cut bus and train fares by end-February.
Mr Lye said he is keeping an ‘outperform’ rating on ComfortDelgro and SMRT with respective target prices of $1.97 and $2.08. But he does not expect the benefits from the Budget incentives to be substantial after the savings are passed to commuters and taxi hirers.
Deutsche Bank and UOB KayHian are sticking with their ‘buy’ calls on SMRT, though they expect the benefits derived from the Budget to have a neutral impact on earnings.
‘Although the benefits of cost savings from the budget are likely to be passed on, firm ridership and falling oil prices provide resilience to earnings,’ said Deutsche Bank analyst James Tan. UOB KayHian cited strong cash earnings and stable yield of 6.1 per cent as key positives.
But some analysts are making ‘neutral’ calls on SMRT for the same reason – that any benefits from the Budget measures will likely be passed on rather than hoarded.
DMG & Partners Securities and Credit Suisse are maintaining their ‘neutral’ ratings on SMRT, while Citi has reiterated a ‘hold’ call on the stock.
JPMorgan maintains a ‘neutral’ rating on SMRT and reiterates its preference for ComfortDelgro with an ‘overweight’ rating.
ComfortDelgro enjoys cost pass-through mechanisms in its overseas earnings in the UK and Australia, where it derives over 40 per cent of its group earnings, and should suffer a negligible impact with no fare increase for 2010, the brokerage said.
SBS Transit – BT
SBS Transit Ltd on Wednesday reported net profit for the third quarter to end September 2008 fell 17 per cent from a year ago to S$8.32 million.
Revenue rose 10 per cent to S$184.81 million due to higher bus and rail fare revenue and higher rental income.
However, operating expenses of S$178.3 million for 3Q08 increased by 12 per cent or S$19 million as compared to S$159.3 million in 3Q07 due mainly to higher fuel and electricity costs which increased by 51.9 per cent or S$17.7 million.
Group cash and cash equivalents as at 30 September 2008 was S$12.6 million. If the held-for-trading and available-for-sale investments were to be included, the cash position as at 30 September 2008 would be S$74.9 million.
SBS said revenue from Bus and Rail Operations is expected to continue to improve on the back of growth in ridership and fare increase from 1 October 2008.
With the economic downturn, advertising revenue is expected to slow down. With the recent drop in oil prices, the cost ofdiesel and electricity is likely to be lower.