SMRT ordered to replace flawed third rail parts

Goodbye to power supplying rail parts with visible hairline cracks, but how much will these unexpected replacements cost SMRT?

This expense is expected to cause a slight uptick in this year’s capital expenditure. Although SMRT services and its operational cash flows have traditionally remained in demand and resilient.

Here's more from OCBC Investment Research: 

Following a directive issued by LTA, SMRT will begin replacing, with immediate effect, the power supplying third rail at locations where hairline cracks on some parts of the third rail joints are more visible. The cost for these replacements have not been accounted for by management’s estimates this year, and it is expect to cause a slight uptick in this year’s capital expenditure with the increase coming from an acceleration of costs from later years.

Despite the latest development and ongoing COI hearings, SMRT’s share price has managed to hold steady and even outperformed against a backdrop of broad-market declines.

At this juncture, the possibility of further sharp sell-offs is deemed to be remote as SMRT services and its operational cash flows remain in demand and resilient.