SMRT sees no end to rail woes in FY16

Maintenance costs will outpace revenue growth.

Singapore’s ageing rail system will continue to drag SMRT’s profit prospects for the rest of FY16, despite hopes that the new rail financing framework will gain traction after the country’s historic election.

According to UOB Kay Hian, the increase in SMRT’s repair and maintenance (R&M) expenses will outpace revenue growth in the current financial year, with FY 16 capex projected to remain high at $475m.

“[This is] mainly due to the upgrading of signaling and communication systems for the trains as well as for purchases of buses and taxis. For the second consecutive quarter in 2QFY16, SMRT recorded an operating loss for its train operations and extended losses in its LRT business. The tough rail operating environment is likely to persist in the near term as repair and maintenance (R&M) works intensify due to the ageing rail system,” noted UOB Kay Hian.