Category: SBSTransit
Transport – CIMB
Part 1 of 3: Changes to the bus system
• Changes to bus system announced. The Transport Minister, Mr Raymond Lim, announced long-awaited changes to Singapore’s land transport system on 18 Jan 08. Essentially, the key objective is to make public transport more seamless for commuters and to encourage more Singaporeans to choose the bus or MRT over the car. With Singapore’s population expected to surge from 4.68m to 6.5m by 2020, there is a potential 60% increase in demand in daily journeys, from 8.9m to 14.3m. Key strategies are an enhancement of the current hub-and-spoke system to improve connectivity, and the introduction of competition.
• Specific initiatives. The LTA will take on central planning of the entire land transport system. A distance-based fare system would also be introduced. Bus priority measures will be introduced to increase average bus speeds while integrated public transport hubs will continue to be developed and enhanced, supported by an integrated public transport information system.
• Impact of the changes. With increased bus frequencies, running costs are expected to rise for bus operators. In addition, distance-based fares would likely reduce fare income as the transfer fare penalty will be eliminated. Competition will also be introduced as prospective bus operators will have to bid for a package of routes, designed by the LTA.
• What’s next? Rail and car demand management plans are expected to be detailed before the end of Jan 08. For cars, the government may tweak the current 3% annual car population growth rate and raise ERP charges. As for the MRT system, we expect announcements relating to the integration of the new Circle Line and Downtown Line to the existing network as well as a review of the light rail system.
• Neutral on the land transport sector. We maintain our Outperform rating on ComfortDelgro (target price S$2.38, based on DCF valuation, WACC 8.0%), for its global transport footprint, supported by an attractive dividend yield of over 5%. We maintain Underperform on SMRT with an unchanged DCF price target of S$1.82 (7.5% WACC; 2% terminal growth). We see the proposed bus package as potentially challenging for SMRT’s bus operations in the near term.
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.
SMRT, SBS – BT
Bus fares to go up from Oct1, no change for train
Rise of 1 to 2 cents; PTC says majority of commuters will see no increase or small increase
LISTED public transport operators (PTOs) SMRT Corp and SBS Transit have succeeded in their application to raise bus fares but not train charges. Bus fares will go up by one to two cents from Oct 1 after the Public Transport Council (PTC) approved a 1.8 per cent increase, but train fares will remain unchanged.
The PTC said the majority of commuters will see no increase or a small increase. It said 52 per cent of all public transport trips by bus and rail will see no increase. But for 10 per cent, there will be a rise of one cent, while the remaining 38 per cent will see an increase of two cents.
In August 2007, SMRT and SBS Transit – which is part of the ComfortDelgro group – had applied to the PTC to increase bus and rail fares.
The council approved an overall fare increase of 1.8 per cent for adult EZ-link bus fares, but no rise for rail fares this year, after taking into account the fare adjustment cap formula introduced in 2005. ‘The PTC has to strike a balance between safeguarding commuters’ interests and ensuring the financial viability of the public transport operators so that they can continue to improve their services over time and sustain their capital investments,’ said PTC chairman Gerard Ee.
He said as part of PTC’s deliberations, the council compared the PTOs’ Rota (return on total assets) with the prevailing Rota figures of companies with similar industry and risk profiles. ‘The comparison suggests that our rail industry is doing much better. Hence, on balance, the PTC decided against raising rail fares, to the benefit of commuters,’ said Mr Ee.
The council also considered Singapore’s economic outlook and the affordability of public transport. It said the economic outlook is positive with the latest GDP growth forecast for 2007 revised upwards to 7 to 8 per cent and the unemployment rate for June 2007 at 2.4 per cent, the lowest in five years.
The public transport affordability indicator has also been on a downtrend for the past four years, indicating that fares have remained affordable for most commuters.
SBS Transit, which operates three-quarters of the public bus fleet, said that one in three of its commuters will not have to pay more. It said that the fare adjustment will yield $9.3 million for a full year but that will only bring partial relief from higher costs. Fuel costs, for example, rose 21.5 per cent or $18.2 million in 2006.
As for SMRT, it said that about 30 per cent of its bus trips will be unaffected by the fare revision.
‘Bus fares continue to remain affordable for the general public even with the 1.8 per cent increase as this is considerably lower than the annual increase in average monthly income per household of 5.7 per cent in 2006,’ said SMRT chief operating officer Yeo Meng Hin. ‘However, the adjustment does not cover the cost increases posted by the two-percentage-point increase in GST and the 1.5-percentage-point increase in employers’ CPF contribution.’
SBS Transit and SMRT have jointly contributed $0.6 million worth of transport vouchers to help needy families. Together with $2.4 million from the government’s Public Transport Fund, vouchers worth $3 million will be given out this year.