SMRT

SMRT dividend history
FY2011 1.75 6.75 8.5 $129million
FY2010 1.75 6.75 8.5 $129million
FY2009 1.75 6.0 7.75 $117million
FY2008 1.75 6.0 7.75 $117million
FY2007 1.5 5.75 7.25 $110million
FY2006 1.5 5.5 7.0 $106million
FY2005 1.5 5.0 6.5 $98million
FY2004 1.3 3.2 4.5 $68million
FY2003 1.3 1.8 3.1 $47miillion
FY2002 1.3 1.5 2.8 $42million
FY2001 1.5 1.65 3.15 $47million
SMRT has around 1.5 billions of share.

Total dividend since 2001 = $1010 million or $1 billion.

It's time to ask the shareholders to cough out some money for maintenance

Based on the comments on the prospects going forward, the management stated:

"In the current and coming years, there will be more investments required in Train operations from acquisition of operating assets and assets renewal. This will have an impact on the Train business going forward."

Perhaps we cannot reasonably expect the profitability of the train operations (the core business, apart from rental business) to be maintained since the capex and perhaps more regular maintenance will eat into the operating margins. With this in mind, shareholders will do well to reassess if the current market valuation is indeed justified.

(02-05-2012, 04:04 PM)Contrarian Wrote: SMRT mandate is to OPERATE the train infrastructure. LTA build and pay for first set of trains.

SMRT has $600M retained earnings.

Now they want to share costs. It's like having cake and eat it.

To be fair with SMRT, In NSEWL (North-South East-West Line), SMRT owned the operating asset while LTA still owning the infrastructure and leasing it to SMRT for a fee. SMRT paid 1.2 Bils in Apr 1998 for the operating asset, not FOC from LTA.

The asset renewal applies on both the operating asset (trains, singaling system etc) and the infrastructure (sleeper and claws). It is fair and square to share the cost accordingly as stated in the LOA (Licensing and Operating Agreement) between SMRT and LTA

(02-05-2012, 05:05 PM)CityFarmer Wrote: The asset renewal applies on both the operating asset (trains, singaling system etc) and the infrastructure (sleeper and claws). It is fair and square to share the cost accordingly as stated in the LOA (Licensing and Operating Agreement) between SMRT and LTA

I think its more interesting that it was reported in the press that SMRT management is talking to LTA about amendment to the terms of LOA for the EWL/NSL to the regime used for NEL.

Details on the NEL LOA are sketchy (SBST did not disclose much in its AR) but from reading between the lines, SBST did not have to buy over the operating assets from LTA but need to buy replacement for trains, maintenance vehicles, power supply equipment, supervisory control system, escalators and lifts, platform screen doors, environmental control system, tunnel ventilation system, electrical service and fire protection system, signalling system, communication system, automatic fare collection system, depot workshop equipment, access management system and maintenance management system. (SBST 2011 AR Pg 84).

SBST may apply to LTA for a grant for the purchase. A review was suppose to take place on the 5th year of the License (from 2003) but a review has not commenced.

The funniest thing of all is that in a typical 'garmen' fashion, the Circle Line seems to have another set of licensing regime; but I suppose that will be going a bit OT (for now) until it starts hitting SMRT's bottomline.

(02-05-2012, 11:28 PM)lonewolf Wrote:

(02-05-2012, 05:05 PM)CityFarmer Wrote: The asset renewal applies on both the operating asset (trains, singaling system etc) and the infrastructure (sleeper and claws). It is fair and square to share the cost accordingly as stated in the LOA (Licensing and Operating Agreement) between SMRT and LTA

I think its more interesting that it was reported in the press that SMRT management is talking to LTA about amendment to the terms of LOA for the EWL/NSL to the regime used for NEL.

IMO, the need to review the LOA is valid due to more demanding customers' and regulator's requirements, especially so after the Committee of Inquiry (COI) conclusion. The new LOA should be a consensus out from the negotiation between SMRT and LTA.

(02-05-2012, 11:28 PM)lonewolf Wrote: Details on the NEL LOA are sketchy (SBST did not disclose much in its AR) but from reading between the lines, SBST did not have to buy over the operating assets from LTA but need to buy replacement for trains, maintenance vehicles, power supply equipment, supervisory control system, escalators and lifts, platform screen doors, environmental control system, tunnel ventilation system, electrical service and fire protection system, signalling system, communication system, automatic fare collection system, depot workshop equipment, access management system and maintenance management system. (SBST 2011 AR Pg 84).

SBST may apply to LTA for a grant for the purchase. A review was suppose to take place on the 5th year of the License (from 2003) but a review has not commenced.

In case you miss it, the SMRT AR contains detail LOA of Circle Line (CL). The LOA model seem alike with NSEWL's LOA. IMO, the LOA of NEL did not seem any different from others? (I have to admit that i just get general idea from your description without in depth study). The model is LTA own all asset and operator maintain the asset initially. After an initial period of 5-10 years, operator will buy the operating asset, LTA will continue to own infrastructure, with agreement for operator to operate for another 20-30 years.

But as we already discussed, the model may change due to conclusion from COI and negotiated consensus.

(04-05-2012, 10:48 AM)CityFarmer Wrote: In case you miss it, the SMRT AR contains detail LOA of Circle Line (CL). The LOA model seem alike with NSEWL's LOA. IMO, the LOA of NEL did not seem any different from others? (I have to admit that i just get general idea from your description without in depth study). The model is LTA own all asset and operator maintain the asset initially. After an initial period of 5-10 years, operator will buy the operating asset, LTA will continue to own infrastructure, with agreement for operator to operate for another 20-30 years.

But as we already discussed, the model may change due to conclusion from COI and negotiated consensus.

You can't blame me for being confused since its only seems that this LOA model applies to SMRT for the EW/NSL and CCL; but not to SBST for its NEL or the more recent DTL.

SMRT Annual Report 2011 Wrote:SMRT Trains is obliged to purchase the operating assets of the CCL on 4 May 2019, based on the net book value recorded in LTA’s audited accounts with depreciation charged on a straight line basis over the useful lifespan of the operating assets. These assets include trains, permanent way vehicles, power supply equipment and cabling, supervisory control system, escalators and lifts, platform screen doors, environmental control system, signalling system, communication system, automatic fare collection system and depot equipment.

I have tried but failed to find out more details about NEL operating license but there is no indications anywhere to suggest that SBST is obligated to purchase the operating assets of NEL.

If we based on the CCL LOA model, then SBST will also be obligated to purchase the operating assets from LTA 10 yrs after the initial award on 15 Jan 2003. That will be Jan next yr and you dun see any disclosure on the part of SBST.

In fact, the CCL LOA requires SMRT to set aside money into a reserve account (S$30 million annually or 75% of the post-tax surplus derived only from the operation of the CCL System - whichever lower) [SMRT AR 2011 pg 134).

Again this disclosure is missing from SBST which probably mean its not a requirement on the part of SBST. Logically one must conclude that SBST is not obligated to purchase the NEL Operating assets; unlike SMRT for CCL. Of cos, the absence of proof is not proof of absence.

In the press release for the award of the DTL, we have the following:

SBST Press Release Dated 29 Aug 2011 Wrote:It is estimated that the Company will pay a total licence charge of $1.6 billion over a 19-year period, commencing from 2013, subject to ridership growth and profitability. The licence amount comprises both fixed and variable components. Under the terms of the licence, the LTA will retain ownership of all operating assets and infrastructure, and will pay for asset replacement, while the Company will pay for operations, maintenance and insurance.

[ Source ]

This one explicitly states that LTA retains ownership of all operating assets and infrastructure. So SBST does not need to buy over the operating assets. This makes sense to factor in the shorter licence period.

Could SMRT be headingfor nationalisation? This is what some analysts are hinting.Not sure what it would mean for shareholders.

(05-05-2012, 12:14 PM)VestedInterest Wrote: Could SMRT be headingfor nationalisation? This is what some analysts are hinting.Not sure what it would mean for shareholders.

IMO, nationalisation is unlikely. But if it is true, it will be equivalent to a GO for SMRT. A "cash out" opportunity for shareholder, but not sure by a "bleeding" or "rewarding" price?

Personally, I don't think all that happen to SMRT is a coincidence. If you think about it, I get the feeling that they are trying to depress the share price.

1 week before announcement of result , they announced the $900m programme without specifying how much LTA will be co-sponsoring. Next their profit drops, dividend cut and they take an impairment of goodwill.

If you are SMRT management, will you announce a $900million plan 1 week before the release of a very lousy result? You could have delayed annoucing it, and at least wait till the % sharing with LTA is confirmed. What's more of the $900m, $200m has been announced much earlier.

Then for their results, they take a full impairment of goodwill which I don't see the reason why they should, unless the bus is going to result in losses for the next 5 years. No one is forcing them to take an impairment of goodwill. Then they still announced a cut in dividend which drastically affected the intrinsic value for those that use a dividend model.

And if you read the newspaper today "Work under way to make MRT system more reliable" , Lui actually says:

"details are being worked out, but broadly, the cost of infrastructural works - such as replacing rail sleepers - will be borne by the LTA". Resleepering is likely to be the major cost of the $900m apart from the signalling system, since resleepering is a project to be carried out until 2019. The $900m is likely to be $600m and below as Lui mentions that infrastructure work will be carried out by LTA.

This is just my personal opinion and speculation, everything can really just be a coincidence. Perhaps SMRT has a management that is not afraid of short-term share price ahead of its AGM

I don't believe that SMRT will be nationalized. government is encouraging private partnership for public work under public private partnership(PPP) for various water/power/energy projects in Singapore. Is nationalization the way backward?