Public transport operators to rake in huge gains on back of oil rout

Higher fares will also provide another boost.

Land transport operators are expected to rake in huge gains as oil prices collapse. According to DBS, the massive price slump will offset mitigating factors such as the SGD’s weakness against the greenback.

Although oil has fallen by close to 50% in just three months, CD and SMRT’s share price have climbed by only 1% to 3%. DBS believes that oil prices will hover at US$80 and US$70 per barrel for 2015 and 2016/

“Energy and electricity account for between 9% to 14% of CD and SMRT’s costs. The recent slump in oil price and bringing it to multi-year lows will have a positive impact on land transport operators, based on our expectations. We have thus further lowered our cost assumptions for both operators, and are raising forecasts by 4%-9%,” stated DBS.