Can weary SMRT shake off its ageing rail woes?

Maintenance costs devour almost half of rail revenue.

The transport company’s headaches with its deteriorating rails have been sticking for a relatively long time now, and analysts are saying it’s going to take its toll on SMRT’s earnings for at least the next three years.

According to analysts from OCBC, maintenance-related expenses will continue to be a drag to SMRT’s earnings, along with its rail renewal programme.

“For 2QFY16, rail maintenance-related expenses formed 41% of rail revenue and management expects further increase to 50% of rail revenue by 4QFY16,” OCBC said.

OCBC explained that rail maintenance woes would heighten due to the 1.9% fare cut, ramping up staff headcount in preparation for the Tuas West Extension, increasing headcount required to support maintenance needs with the delivery of 45 new trains, and doubling down on efforts to address troubling spots in the ageing networks.