Sorry SMRT but you’ve just lost millions to ComfortDelGro

Although an actual yield projection is not yet determined, the Down Town Line (DTL) could achieve a shorter breakeven period and ramp up ridership faster as compared to the North East Line (NEL) and Circle Line (CCL), says CIMB.

“[The rosy growth prospect is based on the fact that] DTL is built in existing residential and commercial estates, whereas the CCL, for instance, was built ahead of demand,” noted transportation analyst Lee Wen Ching at CIMB.

The tender to operate DTL, which is expected to start running in 2014 was awarded to SBS Transit, ComfortDelGro (CD)’s 75%-owned subsidiary. Having won the tender, the following are the growth opportunities which await CD, according to Ms. Lee:

First, ridership growth could be boosted from FY14 onwards when the DTL starts running. Management believes in stronger ridership for DTL and faster breakeven than the Circle Line (CCL), as it is built in existing residential and commercial estates, as opposed to CCL which had been built ahead of demand.

Second, the DTL introduces new rental opportunities, with more than four times the gross commercial space of CD’s North East Line. Rentals typically come with higher operating margins than train operations. For instance, SMRT’s rental margins are 77% vs. its train operations’ 21%.

Third, CD will not bear significant capex as LTA owns the assets under the new financing framework, freeing up its balance sheet for other investment opportunities.

The analyst however said that the benefits from the DTL will only materialise from FY14.

“Over the next two years, CD will incur higher operating expenses as it ramps up operations ahead of the commissioning of DTL. As such, CD may need to endure a margin squeeze before it can reap the fruits of this contract,” Ms. Lee said.

To contact the journalist, you may send your message to krisana@charltonmediamail.com

Also Read

Changi Airport Group boosts logistics capacity with new Nexus One facility

SG port congestion eases, northern Asia delays persist

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

I want to download the media kit

Top News

SBR 5 Lorem Ipsum News 2 [8 May]

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum.

5 days ago

SBR 4 Lorem Ipsum [8 May Top Stories]

5 days ago

Vibrant Group wins suit against Blackgold Australia

The group shall be paid damages and fees by Blackgold Australia’s ex-CEO and ex-chairman.

Lorem Ipsum text in year 2025

Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old.

Agribusiness