Dear SMRT, it’s not time to rejoice yet

Efforts to replace signaling system and government’s move to increase rail capacity of the CCL have no immediate financial impact.

SMRT announced yesterday that it will invest S$195m to replace the signalling system on the North-South East-West lines (NSEWL), which will reduce minimum waiting time for commuters from 120 seconds to 100 seconds.

In a separate announcement, the Land Transport Authority (LTA) awarded contracts to purchase 16 more trains – at a cost of S$134m – for the Circle Line (CCL) to increase rail capacity. The new trains will be added progressively from 2015 and increase peak capacity of the CCL by 40%.

Lim Siyi, analyst at OCBC Investments Research however notes that as the signalling system replacement project will only be completed in phases from 2016, there is no immediate financial impact and hence it is leaving its earnings estimates for FY12 unchanged.

SMRT announced that its 3Q12 revenue gained 10% YoY (+2.7% QoQ) to S$268.2m on the back of higher MRT and bus ridership. However, higher operating expenses offset this growth with a S$31.4m or 16% YoY (+1.8% QoQ) increase, and reduced net profit to S$37.0m or -13.9% YoY (+8.6% QoQ).

Going forward, OCBC expects operating expenses to remain elevated and tweaked its net profit estimates lower by 4%.