SMRT’s margins at risk from extremely low bus package tender

Is it willing to sacrifice margins to gain market share?

Analysts warn that SMRT’s extremely low tender for the Land Transport Authority’s first public bus contract could put its already thin operating margins at risk.

CIMB noted that SMRT is an outlier among the eight shortlisted bidders. Its tender price was 25% below the 2nd lowest bid price by SBS Transit, and 38% below the highest bid price submitted by Britain’s Go-Ahead.

“A plausible explanation could be that SMRT is willing to gain market share at the expense of margins. SMRT has around 25% market share of Singapore’s public bus business vs. CDG’s around 75%. If SMRT is awarded the Bulim contract, there could be ripple effects such as more competitive bidding and lower margins for future public bus packages,” stated CIMB.