Why Singapore's 3.2% fare hike is still bad news for SMRT

Margin pressures linger, says analysts.

According to Maybank Kim Eng, the Public Transport Council (PTC) yesterday announced a fare increase of 3.2% to be implemented from 6 Apr 2014. Maybank stressed that this hike fell short of its expectations.

For SMRT, Maybank noted that the net benefit of SGD13.2m from the revision will not be sufficient to ease the margin pressures on its fare- based business.

Here's more:

It did not roll out the full fare cap of 6.6% (2012: 4.5%; 2013: 2.1%) that was withheld over the past two years in a bid to minimise the impact on commuters.

The balance of the fare adjustment (3.4%) will be implemented in the subsequent years. The public transport operators (PTOs) are also required to make a one-off contribution to help fund needy commuters.

The fare hike of 3.2% falls short of our expectations for a 5% increase. After adjusting for the one-off contributions to fund needy commuters, we estimate SBS Transit and SMRT can expect to receive a net benefit of SGD28.8m and SGD13.2m respectively.

This is below our expectations and we lower our forecasts for SMRT and ComfortDelGro by 49% and 4%, respectively, and cut our TPs.

Our investment thesis on the sector remains largely unchanged, with the latest development reinforcing our negative view on SMRT. We do not think the net benefit of SGD13.2m from this revision will be sufficient to ease the margin pressures on its fare- based business.

Besides headwinds from persistent cost pressures, SMRT faces the threat of cannibalisation from the opening of Downtown Line Stage 2 in 2016. Without radical reforms, Singapore’s Land Transport business model is unsustainable in our view. ComfortDelGro offers a more insulated exposure as its Singapore fare-based business makes up <8% of its market value.

You're the reader we write for. You're also the person our partners want to reach.

If that sentence describes you — a founder, a C-suite, someone whose attention companies pay good money for — then you already understand why SBR works. We've spent twenty years earning the trust of readers exactly like you. Which is exactly what makes this an interesting place for your company to show up, too.

The ways it can show up are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. The right fit depends on what you're trying to do, which is why we'd rather start with a conversation than send a rate card.

If your company has something this audience should know about, we'd like to hear what you're working on.

No rate cards until we understand the brief. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia

Top News

30 One-Sentence Stories From People Who Have Built Better Habits

None of these stories are mine. They were sent to me by readers of Atomic Habits. My hope is that these examples will illustrate how real people are putting the book into practice. They will show you what people are actually doing to build good habits and break bad ones. And hopefully, they will spark some ideas for how you can do the same.

news conversion

SBR 5 Lorem Ipsum News 2 [8 May]

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum.

SBR 4 Lorem Ipsum [8 May Top Stories]