extracted from Q4 report ended 31march 2007

OUTLOOK BROADLY POSITIVE, SENSITIVE TO DIESEL PRICE MOVEMENTS

Fare revenue for 1QFY08 is expected to be higher compared to the corresponding period of the previous financial year and 4QFY07 due to higher ridership. However, the increase in GST by 2 percentage points with effect from 1 July 2007 will unfavourably impact fare revenue. Rental and advertising revenues for 1QFY08 are also expected to improve.

Operating costs will increase in FY2008 due mainly to more scheduled repairs and maintenance, higher electricity costs and the 1.5 percentage points increase in employers CPF contribution. The price of diesel is expected to remain volatile.


Extracted from presentation to media in Apr 2007

Group Highlights FY2007
Group revenue           : $743.1m (+4.4%)
Operating expenses    : $625.6m (+4.7%)
Profit after tax            : $135.8m (+31.0%)
Basic EPS                   : 9.0 cents (+30.4%)  [TC : 8.9 diluted]
Total gross dividends  : 7.25 cents (+3.6%)
                                    [final dividend: 5.75 cents]


             FY2003    FY2004     FY2005     FY2006     FY2007
EPS          4.8          6.0           8.4           6.9           9.0
Gross       3.1          4.5           6.5           7.0           7.25
div/sh

Rental contitues 4.6% of revenue but 17.6% of overall EBIT.
Revenue in FY'06/'07 is $34.5mil, it is expected to add another $8 mil in this financial year.

Comments
Consider a modest 5% increase in EPS assuming all goes well :
EPS = 8.9*1.05=9.345c
For PER=18 => Price = $1.68
I think, wait for price to drop till $1.70 and wait for Q1 result.

30-Apr-07

Too early for speculation

Well within our expectation. SMRT reported its FY07 financial results ended 31 March 2007 with revenue rose 4.4% to S$743.1 mil from S$711.7 mil a year ago whereas net profit grew 31% to S$135.8 mil from S$103.6 mil. The good results are due mainly to the increased ridership and growth from rental and advertising businesses. Revenue was well within our expectation whereas net profit beat our estimate by 10.4% (Table 1). Total operating expenses also increased by 4.7%, due to higher staff costs, depreciation, repair and maintenance, and electricity and diesel costs. As a result, its EPS increased 30.4% to 9 cents, which is in line with our forecast of 8.1 cents. SMRT recommends a final dividend of 5.75 cents per share tax exempt, which will bring the total dividend for FY07 to 7.25 cents, an increase from 7.0 cents in FY06. Net profit margin also improved from 14.6% to 18.3% owing to better operating profits, gain on disposal of investments and lower tax expenses.

Segmental performance. As compared to FY06 (80.6%), its fare revenue continues to contribute more to the overall revenue (81.1%). See Figure 1. Supported by strong GDP growth, the ridership in its MRT trains increased 5.1% in FY07. The ridership growth contributed to a revenue growth of 6.1% from MRT operations at S$404.4 mil. LRT operations also saw a slight growth in its ridership (+1.7% yoy) and revenue (+2.8% yoy). However, due to the higher energy and staff costs, an operating loss of S$1.0 mil was incurred. Bus operations grew 3% in revenue and 1.9% in ridership. Its most worrying business segment - the taxis operations recorded a 14.1% drop in revenue from S$79.26 mil in FY06 to S$68.09 mil in FY07 due to a smaller hired-out fleet. Although more efforts were pumped in to increase hired-out fleet, the operating loss of S$5.1 mil was recorded as compared to S$1.5 mil in FY06. However, we begin to see an improvement in the fourth quarter of FY07, when more taxis were hired out. Its rental business continues to be promising, with revenue growing 32.8% yoy to S$34.47 mil, on the back of growing lettable space and occupancy rate. Other smaller business segments such as advertising and engineering and other services also grew.

Merger with ComfortDelgro - Too early for speculation. Speculation surfaced after ComfortDelGro proposed to the government on possible merger with SMRT. The idea was for one company to operate bus services and the other to run the subway lines, so as to enable the companies to cut costs and move towards optimization. But we reckon it is still early for a solid deal to go through.

New Downtown Line on the way. The Government gave nod to Downtown Line, which will be the fifth MRT line to be built in Singapore. It will comprise 40km track and 33 stations, and to be completed by 2018. To be built in three stages, the first phase is a 4.3km track that link the Circle Line to Marina Bay financial Centre and the Sands Integrated Resort, the 16.6km second phase will link to Bukit Timah Road and the 19.1km third phase will link to the east, passing the MacPherson, Bedok Reservoir and Tampines areas. Transport Minister Raymond Lim said that it is too early to say who will operate the Downtown Line. We think that SMRT is a strong candidate for the operation, but we do not want to speculate.

25 Apr 07

Dont chase this train

Robust ridership growth and generous dividends in FYE Mar 07. The groups firm results were led by a 5.1% growth in MRT ridership, which translated to 9% EBIT growth for this business. Higher rental and advertising income also helped boost earnings. SMRT benefited from an S$15m adjustment for reduction in tax rate to deferred tax. For the full year of FY07, total net dividends declared works out to be c. 7cts.

Outlook remains stable with expectations of continued modest earnings growth. We expect ridership growth to be 3%-4% over the next two years, driven by population growth and underpinned by a strong economy. Higher contribution from rentals and advertising segments should also add to the bottom line while the Groups taxi business is looking to turn around from losses.

A merger with ComfortDelgro could be positive but it is not a done deal. There has been talk of a possible merger with ComfortDelgro that would create an enlarged entity with likely significant cost savings and profit enhancement from less competition in various segments e.g. taxi. We believe value enhancement from a merger could be as much as 25% but also opine that we are still quite far away from seeing the merger as a done deal. Results of a Public Transport Review are only expected towards the end of the year, and various stakeholders especially the public, have also yet to be fully consulted on this issue. We thus think it is still too early to assume a merger would happen.

Downgrade to HOLD, TP S$1.67. Our target price of S$1.67 is based on a target net yield of 4.5% for FY09. Assuming that a merger is on the horizon, a 25% premium could be justifiable to account for cost savings and higher profits from the taxi segment, which would translate to a potential target price of S$2.09. Thus, the upside is limited even if we assume a merger does happen. SMRT is currently trading at 22x FYE Mar 08 PER and 3.7% yield whilst ComfortDelgro is trading at 21x FYE Dec 07 earnings and 3.8% net yield.

Comment about 4QFY07 Result





-- Edited by tfwee at 00:51, 2007-04-25

Proposal to merge transport operators
- April 20, 2007
AsiaOne

A formal proposal to restructure the public transport industry, which includes a mega-merger of the two major transport companies in Singapore, has been sent to the government.

It was submitted by Mr Lim Jit Poh, chairman of transport giant ComfortDelGro, according to a report in The Straits Times today.

This follows a call from the Transport Ministry six months ago for an industry review to raise public transport ridership sizeably.

The proposal, said the ST report, suggests two options: either a mega-merger with rival SMRT to create a single public transport group, or having one operator run the buses and the other, trains.

While both SBS Transit and SMRT have train and bus services, SBS Transit does not make much money from rail. This is conversely the case with SMRT and their bus services.

Problems for commuters have arisen from this clash, as too many bus services were removed to avoid duplicating MRT services. Commuters also require more transfers and as a result, travel in many parts of the island is far from "seamless".

Statistics from the General Household Survey 2005 conducted by the Department of Statistics found that the proportion of commuters who could take a straight bus to work had fallen from 25 per cent in 2000 to 21.9 in 2005. Furthermore, those who had to take both bus and train went up from 13.9 to 15.1 per cent

While the Transport Ministry declined to reveal the contents of the proposal by ComfortDelGro, it is expected to release results of its review by the end of the year, said The Straits Times.

SMRT President Saw Phaik Hwa told ST that a bus-versus-train set-up could mean duplication of resources and as a results, higher fares. She added that it may not be environmentally sound.

Ms Saw said it was unnecessary to overhaul the industry, but improvements could be made.

BT, Published February 6, 2007

Dhoby Xchange tenants protest against SMRT

SHUTTERS came down yesterday at about 13 outlets at the Dhoby Xchange underground mall as shop tenants protested against their landlord, SMRT, about poor business. This was a 'last resort' to get SMRT to live up to the spirit of what it had promised before the rental contracts were signed, the tenants said in a press statement.

The protesting shopkeepers - more than a quarter of the 46 tenants at Dhoby Xchange - were complaining that SMRT did not do enough to promote the mall. The transport operator did not put up enough signs pointing commuters to the mall and did not do enough to 'promote' the shops there, they claimed. Disgruntled tenants also said they had been led to believe that many MRT commuters using Dhoby Ghaut station would inevitably pass by Dhoby Xchange on their way in and out of the station, but the layout of the station is such that commuters do not have to pass by the shops at all. 'There is no point in opening the outlet when only four people walk past my shop. Sometimes I have zero sales,' a spokesman for shoe retailer Tinkerbell Concept said. Tinkerbell has six other outlets in Singapore.

BT understands that the tenants pay about $3,000 to $8,000 for rent monthly.

Responding, SMRT said that consumer sales in Dhoby Xchange have increased by 70 per cent since May last year, calculated from the redemption receipts from shoppers in its promotions. SMRT also said that it has 'stepped up efforts' to promote the mall through advertising across its network and in the media. There have been more directional signs and on-site showcases at the concourse, platform and retail floors. Still some of the tenants maintain that SMRT 'does not have a coherent marketing concept' and that it has not revealed plans to improve the mall. They even say that the weekend shuttle bus service to Little India and Chinatown from Dhoby Ghaut has only diverted human traffic away from the mall. They claim potential shoppers are further discouraged from venturing into the mall by sporadic leakages at one of the two entrances to the shopping area that wet the entrance floor and stairway with murky water. SMRT attributed the leaks to 'exceptional high rainfall' recently, and said the area is under the purview of SBS Transit and the Land Transport Authority which are working on the problem.

SMRT said that it has offered the tenants the option to end their leases early when they have replacement tenants, and the company has been actively looking for new tenants. 'We have received good response and we are confident we will be able to fully replace those tenants in the near future.' To ease cash flow, SMRT said it offered tenants a deferred rent payment scheme. The unhappy tenants conceded that SMRT has indeed approached individual tenants with financial assistance packages, but the schemes often require tenants to clear their outstanding rent before future rent payments can be deferred. 'This is in sharp contrast with Cathay Organisation's 50 per cent rental rebates to their tenants twice in the face of low human traffic at the new Cathay Building shopping mall,' they said.

Extracts fm DBSVickers report dated 29-Jan-07,

Room for higher dividends

Robust performance led by MRT and Advertising segments. Group revenue rose by 5.2% yoy in 3Q07, led by 6.9% growth in MRT revenues and 27% yoy increase in Rental and Ads revenue. MRT revenue growth was largely driven by higher ridership (+5.7% yoy) and partly by higher yields (+1% yoy). Taxi revenues fell by 10% yoy but improved sequentially by 3.5% from 2Q07. There was also a slight boost from higher gains from disposals of investments but SMRT results were above expectations largely due to higher operating earnings.

Earnings raised, room for higher dividends. We have raised our FY07 and FY08 earnings forecasts by 9% and 11.3% respectively, to reflect higher than expected rider-ship growth, from 3% to 5%, and also to factor in higher revenues from Rentals and Ads segments. We have also introduced FY09 forecasts. We expect earnings growth for SMRT to moderate over FY08-FY09 to single digit pace but given higher profitability and strong cash flows, expect the Group to maintain its high payout ratios. We have raised our net DPS projection to 6.5cts and 7cts for FY07 and FY08 respectively, translating to a payout of 81%-82%, which is in line with the 82% payout ratio in FY06.

Maintain BUY, TP raised to S$1.56. As we see SMRT as a yield play, our valuation methodology is based on a target yield, which we have lowered from 5% to 4.5%. This is in line with other yield plays in Singapore which have experienced yield compression from market expectations of lower interest rates in the future. Our target price of S$1.56 is based on a target yield of 4.5% for SMRT in FYE Mar 08. Maintain BUY.

SMRT POSTS 35.6% NET PROFIT GROWTH TO S$40.7M FOR THIRD QUARTER ENDED 31 DECEMBER 2006

• 3Q FY2007 Revenue increased by 5.2 per cent to $188.4m
• Net profit for first nine months rose 19.2 per cent to $99.6m

Total operating costs for the third quarter increased by $10.2 million to $153.1 million on account of salary adjustments and increases in depreciation, repair and maintenance, other operating expenses and electricity costs.

For the nine months ended 31 December 2006, Group revenue rose 3.5 per cent to $556.2 million. Total operating expenses for the first nine months was $457.6 million, an increase of 3.1 per cent as a result of higher diesel costs in the first six months and cost increases in areas as outlined above.

As a result of better operating profit and gain on disposal of investments, net profit after tax improved 35.6 per cent or $10.7 million in the third quarter and 19.2 per cent or $16.1 million for the past nine months. Both third quarter and year-to-date FY2007 results were not impacted by losses from associate recognised in 3Q FY2006.

Commenting on the Group’s year-to-date performance, SMRT’s President and CEO Saw Phaik Hwa remarked: “Despite the higher operating cost environment, SMRT is well-positioned for FY2007 and beyond with our pursuit of growth in our core businesses and our relentless focus on operational excellence, prudent cost controls and service quality.”

OPERATING PERFORMANCE BY BUSINESS

MRT Operations
On the back of GDP growth, 3Q FY2007 recorded the highest MRT ridership of 110.9 million since revenue service started in 1987 with a growth of 5.7 per cent compared to the same quarter last year. MRT revenue improved 6.9 per cent to $103.1 million from higher average daily ridership and to a lesser extent from the fare increase effective 1 October 2006. Revenue growth, partially offset by higher staff costs and electricity prices due to the new electricity contract effective in October 2006, led to a 3.9 per cent increase in operating profit to $31.5 million on a year-on-year basis for the quarter.In the first nine months of FY2007, revenue from MRT operations increased by 6.1 per cent to $303.3 million, driven by GDP growth. MRT operations achieved a 22.5 per cent operating profit growth at $89.1 million.

LRT Operations

LRT revenue in 3Q FY2007 was about the same as the corresponding quarter last year at $2.0 million while operating loss for the quarter was up slightly at $0.2 million on a year-on-year basis. LRT revenue for the first nine months of FY2007 was slightly higher at $6.0 million, incurring an operating loss of $0.5 million on the back of higher electricity expense.

Bus Operations
Bus revenue in 3Q FY2007 improved 3.2 per cent to $47.5 million compared to 3Q FY2006 due to higher average daily ridership and to a smaller extent from fare increase effective 1 October 2006. During the quarter, operating profit increased by $0.8 million to $4.0 million due mainly to higher ridership and lower diesel costs, partially offset by higher depreciation expenses with the capitalisation of IBOS (Integrated Bus Operating System). Revenue from our Bus operations for the nine months in FY2007 grew 2.9 per cent to $142.6 million. The corresponding operating profit declined 43.9 per cent to $5.1 million as a result of higher staff, diesel, depreciation and repair and maintenance expenses in the past months.

Taxi Operations
For 3Q FY2007, taxi rental revenue declined 9.7 per cent to $17.5 million with contributions from a smaller hired-out fleet compared to the same quarter last year. Compared to the second quarter FY2007, the number of hired taxis in the third quarter has grown from 2,218 to 2,307. Operating loss for the third quarter was $0.6 million compared to $0.9 million operating profit in the previous corresponding quarter. For the nine months in FY2007, taxi rental revenue fell 17.4 per cent to $50.6 million. Operating loss of $4.7 million was posted for the first nine months.

Rental of Retail Space
Rental revenue in 3Q FY2007 continued to grow 28.8 per cent to $8.6 million with higher rental contributions from re-developed shop space at various stations on a year-on-year basis. Total lettable space increased by 10.7 per cent in the quarter. Higher rental yield and increased lettable space, partially offset by increased staff costs and depreciation due to completed refurbishments of retail space at stations, led to a 19.3 per cent increase in operating profit to $6.4 million in the quarter. With a robust revenue growth of 31.1 per cent to $25.3 million in the first nine months of FY2007, rental operating profit rose 21.3 per cent to $18.9 million compared to the previous corresponding period.

Advertising
Advertising revenue in the quarter grew 36.7 per cent to $4.8 million on a year-on-year basis as more advertising spaces were taken up on trains and stations. Quarterly operating profit was 44.7 per cent higher at $3.4 million. Over the first nine months, advertising revenue improved 22.8 per cent to $12.3 million and operating profit rose 24.7 per cent to $8.2 million respectively.

Engineering & Other Services
Revenue from engineering and other services in the third quarter and first nine months of FY2007 were slightly lower compared to the same period last year at $4.8 million and $16.2 million respectively. However, operating profit in 3Q FY2007 more than doubled from $0.9 million to $2.3 million partly due to higher diesel sales to taxi hirers. This also helped to raise operating profit for the first nine months from $3.0 million to $3.7 million, albeit partially affected by higher raw material and staff costs.

OUTLOOK AND PROSPECTS
Fare, rental and advertising revenues for 4Q FY2007 are expected to be slightly higher compared to the corresponding period of the previous financial year, though lower compared to 3Q FY2007 due to seasonal fluctuations. Total operating expense for the fourth quarter will rise against 3Q FY2007 as a result of scheduled repairs and maintenance.The price of diesel is expected to remain volatile for the fourth quarter.The above factors will have an impact on the performance for the fourth quarter.

 

Comment : Not much surprise from SMRT result. The only negative point is still the loss on LRT and Taxi operation. One positive point from the 3Q Result is the loss for taxi operation is lower compared to the same period last year but SMRT still cannot overcome the loss in the Taxi operation as they are one of the smallest player in the market. Maybe it is time for SMRT to exist from this business. The only positive point is that retail and adveristing are improving from strength to strength. This is especially so for retail as they have been trying to convert unused space at around the MRT station to become retail shop. I am still trying to see whether there is any more information on the cash flow that I can post..... :)

 

BT, Published December 8, 2006

A boon for both SMRT and Citibank

SMRT Corporation's landmark tie-up with Citibank Singapore (Citibank) ought to delight its shareholders who will see the rental from letting out space in its stations as adding to the gravy train. Under the deal, Citibank customers will in a few years' time have access to 10 bank branches (in addition to its present nine-bank network) and instant banking centres (mainly automated teller machines or ATMs) at all 51 SMRT stations. This will provide the American bank's customers the convenience of carrying out their banking transactions before boarding a train or as soon as they reach their destination.

Citibank is not the first bank to have operations in an MRT station. DBS Bank and Oversea-Chinese Banking Corporation (OCBC) have up-and-running branches. But the American bank's deal is the biggest to date in the financial sector. The Citibank deal is part of SMRT chief executive Saw Phaik Hwa's vision three years ago to transform its 251,000 square feet at its 51 stations into retail space to yield additional revenue for the train operator.

Ms Saw said after inking the deal with Citibank: 'At SMRT, we take leadership in innovative service initiatives that create value for our passengers. This collaboration with Citibank, a global banking giant, is a milestone for SMRT. 'Citibank's presence in our 51 MRT stations is in line with our drive to transform our MRT stations into lifestyle destinations of choice. Coupled with the launch of the first Citibank-SMRT co-brand credit/debit card-cum-contactless fare card, this synergistic partnership brings greater convenience and rewards for our commuters.'

The expanded customer touchpoints and the new Citibank-SMRT card, when combined with other groundbreaking innovations such as instant card issuance, is intended to present a seamless experience for customers.

Miniature malls

With more than two million passengers riding SMRT trains daily, Ms Saw's vision makes perfect sense.

Hong Kong's Mass Rapid Transit (MTR), which was earlier in the retail game, is substantially funded by the Corporation's properties next to its stations. Since the privatisation of the MTR, many of its stations have turned into miniature shopping centres, with bank branches, 7-Eleven or Circle K convenience stores, dentists and medical clinics, drycleaners, and even florists.

Here in Singapore, the move into retail started out more slowly as renovations and major makeovers were carried out at the Raffles Place and Dhoby Ghaut interchanges. Raffles saw lettable space increase from 18,000 sq ft to over 27,000 sq ft, with eateries, boutiques and small retailers paying as much as $10,000 each in monthly rent. Other stations like Tanjong Pagar, Eunos, Simei, Tampines, Pasir Ris, Bugis, Tiong Bahru, Khatib, Expo, Kranji, Paya Lebar and Redhill are being revamped or will be revamped over the next few years. Already, more than 230 shops are now crowding the stations adding more than $20 million to the bottom line.

The retail initiative is part of SMRT's plan to stave off or mitigate the need to increase fares, the bane of commuters.

SMRT has also been trying to take its expertise overseas and has provided advisory, consultancy and training services to Indonesia, China and Vietnam. Recently, it indicated its interest in the $1.3-billion monorail project for Johor Baru.

These initiatives ought to provide both the commuting public and SMRT's shareholders with a win-win situation.

As SMRT states in its annual report: 'A passion for excellence, a far-sighted vision and a global mindset - these are the attributes that drive our organisation to the next level of growth. But experience tells us that growth doesn't necessarily follow from ambitious plans alone. It could mean taking a second look at things and doing our jobs better, or seizing opportunities to carve out new businesses. The point is to constantly propel ourselves forward to scale greater heights. That's the best way to create the strong returns that our stakeholders richly deserve.'

Extracted from Press Release from SMRT

Group revenue for 2Q FY2007 increased 3.0 per cent to $187.6 million due to higher ridership, and revenue growth from rental and advertising.

Total operating costs for the second quarter was slightly higher at $153.3 million due mainly to increased staff, repair and maintenance and energy costs. With higher revenue and interest income, net profit after tax improved 13.0 per cent to $31.6
million.

Group revenue for the first six months ended 30 September 2006 rose 2.7 per cent to $367.8 million. Total operating expenses for the first half-year was $304.5 million, an increase of 1.2 per cent as a result of higher diesel, repair and maintenance, and staff costs. Net profit after tax increased 10.0 per cent to $59.0 million.

Commenting on the Group’s half-year performance, SMRT’s President and CEO Saw Phaik Hwa remarked: “Sustaining the growth momentum achieved over the past quarters, our fare, rental and advertising businesses continued to perform well. Our focus on cost management, customer service and productivity improvements have, in spite of challenging conditions, helped to steer taxi and bus businesses to better performance. We will continue to focus on improving profitability in an increasingly higher operating cost environment.”

The Group declared an interim gross dividend of 1.5 cents per share comprising of 1.23 cents per share less tax of 20.0 per cent and 0.27 cents per share tax exempt for shareholders, equivalent to a net dividend of $18.9 million.

MRT Operations
In the second quarter, revenue from MRT operations rose 5.4 per cent to $102.2 million, whilst operating profit increased 24.5 per cent to $29.3 million on a year-on-year basis. In the first six months of FY2007, MRT revenue increased 5.7 per cent to $200.2 million, whilst operating profit grew 32.4 per cent to $57.6 million. Ridership increase, driven by GDP growth, led to higher revenue for second quarter and half-year. Operating profits for second quarter and half-year in FY2007 were higher due mainly to revenue increase and lower staff and electricity costs.

LRT Operations
LRT revenue in 2Q FY2007 was comparable to the corresponding quarter last year, at $2.0 million while operating loss increased slightly at $0.1 million on a year-on-year basis. LRT revenue for the first half-year of FY2007 increased 1.9 per cent to $4.0 million, whilst operating loss of $0.3 million was posted.

Bus Operations
In the second quarter, revenue grew 2.2 per cent to $48.3 million, generating an operating profit of $1.6 million. Bus revenue for 1H FY2007 improved 2.8 per cent to $95.0 million. Operating profit declined 82.7 per cent to $1.1 million in the first six months of FY2007.
The decline in operating profits for 2Q FY2007 and 1H FY2007 was due to higher diesel costs and higher depreciation expenses with the capitalisation of IBOS (Integrated Bus Operating System). Increases in repair and maintenance expense and staff costs also affected the operating profitability.

Rental of Retail Space
Rental revenue in 2Q FY2007 grew by a robust 34.9 per cent to $8.7 million. Higher rental contributions, partially offset by increased staff costs and depreciation due to completed refurbishments of retail space at stations, led to a 25.2 per cent increase in operating profit to $6.6 million. On the back of revenue growth of 32.3 per cent to $16.6 million in 1H FY2007, rental operating profit rose 22.4 per cent to $12.5 million on a year-on-year basis.

Advertising
In the second quarter, advertising sales improved 16.7 per cent to $3.8 million while operating profit grew 18.4 per cent to $2.5 million as a result of increased advertising on trains, buses and stations. During the first six months, advertising revenue and operating profit improved 15.3 per cent and 13.8 per cent respectively.

Engineering & Other Services
Revenue from engineering and other services in 2Q FY2007 and 1H FY2007 were comparable to the same quarter last year at $5.6 million and $11.4 million respectively. Operating profit in 2QFY2007 was slightly higher at $0.5 million. Lower operating profit for 1H FY2007 was posted at $1.4 million as a result of higher raw material and staff costs.

Taxi Operations
For 2Q FY2007, operating loss was $0.9 million, with lower revenue contributions at $17.0 million from a smaller hired-out fleet. For the first six months of FY2007, taxi rental revenue declined 21.0 per cent to $33.0 million. Operating loss of $4.1 million was posted for 1H FY2007.

Bus and train fares to rise by 1 to 3 cents in October

By Sng Li Wei and Ahmad Osman
AsiaOne
Sep 12, 2006

Bus and train fares will go up by 1 to 3 cents per trip from October 1, but needy families would be given transport vouchers to help them adjust to the higher fares.

The Public Transport Council (PTC) approved the 1.7 per cent fare increase today. It is lower than last year's 2.4 per cent increase, which affected all fare categories.

The new round of increase will be "tiered", meaning the rise will affect those travelling longer distances more, with the lowest fare bands rising only one cent.

Senior citizen off-peak EZ-Link fares pegged to the lowest adult fare band will also increase accordingly, by one cent. Nearly a quarter of commuters are expected to pay the same fares, while slightly more than a third will have to pay one cent more.

Standard and single ticket fares, however, will remain the same, as well as monthly concession fares for students and national servicemen.

SCS Transit and SMRT Corp and SBS Transit applied to the Public Transport Council in early August to raise fares, citing rising fuel and manpower costs.

Mr Gerard Ee, chairman of the PTC, said that in approving the fare increase, the Council had taken care to ensure that fares remain affordable for the majority of commuters, but it also recognise that needy families would need some help to adjust to the higher fares.

"I am heartened to hear thar the public transport operators will be contributing resources in the form of transport vouchers to help needy families in coping with the fare increase by defraying some of their costs," he said.

"This is part of the Government's 'Many Helping Hands' approach where the government, community and grassroots organisations and the private sector all chip in to help."

For those facing financial hardship, help is available from the Citizens' Consultative Committees (CCCs) under their CCC ComCare Fund, which has disbursed $1.95 million to 12,500 cases since it was launched in July last year. The National Trade Unions Congress's "NTUC Care and Share Vouchers" initiative also helps union members from low-income families.

SMRT Corporation and SBS Transit have also contributed $1 million for public transport vouchers which will be detributed by the CCCs in October to needy families.

The 1.7% increase in fares is the maximum allowed under the new fare adjustment cap formula implemented by the PTC last year, and is expected to bring in an additional $9.9 million for SBS transit, but the bus operator said it would only provide "partial relief for the incereased costs pressures", according to a Straits Times report.

Reacting to the fare increase, Mr Seah Seng Choon, executive director of the Consumers Association of Singapore (Case) told AsiaOne: “The increase is affordable for most commuters. Case is glad that there are schemes in place to help those in the low-income groups. We are also glad to note that concess ion pass holders are not affected by the increase.”

Commuter Ms S. P. Chan, 52, a freelance writer, describing the increase as "reasonable", added: I hope the public transport companies will continue to strive to improve the public transport system. I also hope that hawkers will not use the fare hike as an excuse to jack up prices.”

Comparison of average bus and rail fares across cities

City Average Bus Fare Average Train Fare Average Bus Fare (PPP Adjusted) Average Train Fare (PPP Adjusted)
Singapore S$0.66 S$0.94 S$0.66 S$0.94
Hong Kong S$1.21 S$1.53 S$1.29 S$1.63
London S$1.40 S$3.75 S$1.03 S$2.76
New York City S$1.50 S$2.38 S$1.42 S$2.26

Data source: Annual reports of SMRT & SBST (Singapore), MTR & SMB (Hong Kong), MTA New York City, London Travel Report, US Federal Reserve (Exchange Rate).
PPP adjusted -- Using the 2002 Purchasing Power Parity (PPP) Conversion Factor published by the World Bank.
Singapore fares based on 2005 (cuurent) fares. Average fare = total fare revenue / total number of trips

SMRT Group revenue grew 2.3 percent to $180.2M for First Quarter ended 30 June 2006

Group revenue grew compared to the same quarter last year mainly as a result of increased train ridership and growth in rental contributions from commercial spaces, partially offset by a decrease in taxi rental revenue.

Comment: Taxi is pulling down the revenue growth of SMRT again. But if you look carefully at the operating performance of SMRT, one can noted that the buses, LRT and Taxi operation are suffering loss compared to the first Qtr of 2006. This does not look good even though the revenues increase 2.3 percent for Q1FY07. Furthermore, the Engineering section profit decreases 48.2%. The only bright point for this Q result is that Rental, adverstising and MRT are still the golden eggs of SMRT.

For LRT, there is nothing MRT can do to improve the situation unless they totally shut down the operation, which I don't think the governement would allowed as it will reflect badly on the vision of the LRT project. But for Taxi operation, the result is getting from bad to worse. Maybe it is time to sell this division to another operator, who have the economic of scale in managing it. If next quarter, the taxi operation does not improve, it means that the recent price increase in taxi fare is not attracting more people to take up the job since it was mean to increase the income of the cab drivers.

As for the bus operation, SMRT has put up the proposal to PTC to increase fare to offset the higer fuel price, which will improve the situation. Chances are high that PTC would approved the fare increase.

-- Edited by tfwee at 15:31, 2006-07-29

Extracts fm Phillip Securities dated 11-Jul-06,

Follow the leader. SMRT revised its taxi fare structure a week after the adjustment of taxi fare by its peer, ComfortDelGro on 3 July. The fare revision follows exactly the adjustment made by ComfortDelGro and will take effect on 17 July 2006. According to the CEO of SMRT, the fare hike will bring in another 10 per cent income for the taxi hirers.

Double-edge sword. The fare hike seems to be beneficial only to the taxi hirers since no further hiring charges was raised by SMRT, at least for now. The hike is likely to attract more people to join taxi driving as a career. This will potentially increase further rental revenue for SMRT. However, a recent poll conducted by Channel News Asia shows that 36% of commuters would now take buses or MRT trains instead. A double-edge sword for taxi revenue.

Win, loose or draw? With the taxi fare hike, we are likely to see more commuters shifting to cheaper solution: MRT and buses. Hence, the revenue in these segments of SMRT will benefit. The taxi revenue is only made up of 11% of the total SMRT revenue compared to 54% and 26% respectively for MRT and buses revenues. Furthermore, SMRT taxi is a small player in Singapore with a market share of 12 per cent compared to its peer, ComfortDelgro which conquer 72 per cent. Ultimately, the shift of commuters is likely to be a winning situation for SMRT.

Healthy economy growth. SMRT’s fare-based business is closely related to Singapore’s economy. Singapore’s advance GDP estimate showed that real GDP grew by around 7.5% YoY in 2Q06. On a quarter-on-quarter seasonally adjusted annualised basis, real GDP grew by 1.1 per cent, easing from the 7.0 per cent expansion in the preceding quarter. With the slight slowing of GDP growth compared to 10.7% in the last quarter, it is still healthy. The Singapore government has estimated GDP growth to be around 5%-7% for this year. The strong GDP will be a pillar for the growth of SMRT’s train and bus operations.

Maintain BUY. We still maintain a BUY call for now until any further indicators from future revenue announcement. Currently the stock is trading at 16.7x FY07 P/E and 3.1x FY06 P/B. We maintain the fair value at S$1.23. At S$1.23, prospective dividend yield is decent at around 4.6% in FY07, which is attractive to investors seeking refuge from the current market volatility. Maintain BUY.

Extracts fm CIMB Report dated 29-Jun-06,

Chugging farely well along

• Fare increase likely in Oct 06. Given the steady increase in fuel prices since last year, we believe that a fare increase is likely. The expected increase is 1.7%. 
  
• Electricity contract up for renewal in Oct 06. While the fare hike will benefit rail operations and ridership is expected to grow stably. Electricity tariffs are set to increase and we expect a 15% rise when the contract is renewed. 
  
• Taxi operations will continue to remain challenging. Nonetheless, this comprises only about 1% of EBIT. Before troubles surfaced, this was 4% of EBIT in FY05. 
  
• Non-transport income to boost the bottomline. In FY06, another 18 train stations will be developed for commercial space rental. 
  
• Raising EPS estimates by 3%, 2% and 1% for FY07-09 respectively. This factors in the fare hike. Applications to the Public Transport Council for the hike will be submitted in Aug 06. 
  
• DCF target price maintained at S$1.32. SMRT will continue on a stable plane. Leveraging off transport assets to generate non-transport related income would ameliorate the current downturn in the taxi business and fuel pains. Gross dividend yields are now at an attractive 6.5%. Maintain Outperform.