SMRT

Hi CY09.

SP is a private enterprise, indirectly wholly owned by the government. If SP Power makes too much money, where do you think the money comes from? Just as I mentioned earlier, the people does not know what is the cost and so they happily pay whatever SP Power asks. If SP Power is indeed a public company, it would be a very different picture, probably similar to SMRT's current situation.

Without a doubt, SP Power could utilize more of its assets to create more value for its shareholders if it was a public company. Then the people would complain that SP Power was exploiting the people and making its shareholders rich. But they are happy to pay higher price for electricity etc when SP Power is a private government wholly-owned company.

So which model would you like?

Temasek owns 100% SP Power.

(02-11-2013, 10:52 AM)valueinvestor Wrote: Temasek owns 100% SP Power.

Sure or not? But i am not surprised you are right. Singaporeans have always been taken for a ride. We are just too daft as thought by some "Great One".

(01-11-2013, 10:32 PM)CY09 Wrote: Hi,

You need to note that LTA/MOT will not be so generous as they are in the full knowledge that SMRT has cash generating segments in the form of Retail rental and advertising (which SMRT has been excellent in milking). Also, Australia bus model, many operators do not have significant retail renting segment (if memory serves me right). Hence I prefer to see SMRT targeted profitability over the whole range of its biz segments.

Civil servants will not be so nice to SMRT and let them take much profits from bus/train ops along with fat profits from rental. Hence I assumed a 10% ROE for the overall SMRT business because SMRT is in an essential social services, where I believe a lot of public scrutiny will be felt. A 20% ROE (10 cents EPS) will be unlikely as it becomes more beneficial to SMRT shareholders at the expense of public funds (The current govt is paying billions for the creation of DTL and TSL works). A 10% ROE will be a balance between shareholder's and the public interests.

The post seems suggesting that PTOs are at the mercy of LTA/MOT, without any negotiation power. Do PTOs have a choice to call it a day for their bus business? May be it is already a feasible choice of Mr. Kuek, base on observations.

Cost-plus model seemed a sure-go. The margin will be determined by open bid by PTOs, not only the current two, may be more, IMO

Now i guess its all about concessions bargaining btw SMRT and LTA/MOT now, quite sad that things turn out like this. last time i use to think that our SMRT would clone and replicate HK's MTR model by expanding outside its core biz or outside singapore (given saw's excellence in milking the rental spaces like the MTR in HK or TRTC taiwan but tt 1 not listed i think). I would still rather park my cash in comfortdelgo given its 14X PER TTM (geographical diversification and 4+% yield) compared to a 30X PER TTM for SMRT with a 1.6%? div yield.

iirc, 25% increase in staff cost y-o-y? that just too crazy and now they are in a group going to bid for jakarta monorail line? I think theres just too much risk here, the gearing level is getting exponential... given 2014 theres some borrowings due, there might even be a rights issue to boost liquidity if the indonesia expansion goes ahead. I will polly going in post rights or when a significant margin of safety is present, its just not present now.

On valuation side, I tend to lean towards CY09's view, will probably lean towards a target ROE for overall business, polly high single digit or lower teens ROA on its rail&bus like other developed markets like in HK, Aus, JP. No reason for SMRT to be the special blue eye boy here.. MTR in HK has high ROE due to their in retail space and prop development, take that out the ROA on its transport is about 10%, same like some of the JR companies.. in JP those JR also have to expand into commercial spaces to increase their profitability.

What can we expect from a management team make up by former army regulars ?
Good army gen= good businessmen ???
Yes sir , no sir ???

(03-11-2013, 05:21 PM)cfa Wrote: What can we expect from a management team make up by former army regulars ?
Good army gen= good businessmen ???
Yes sir , no sir ???

This reminds me of a Warren Buffett's quote,

"I try to buy stock in businesses that are so wonderful that even an idiot can run them. Because sooner or later, one will."


I guess SMRT is not such a wonderful business after all.....

(Not Vested)

As announced the hdb conservancy charges will increase in spite of many unhappiness, the next to come may be the mrt fare. Maybe the gov is very confident they w secure enuff support in coming 2016. In that case, the SMRT profit should improve if that happens.

(03-11-2013, 05:21 PM)cfa Wrote: What can we expect from a management team make up by former army regulars ?
Good army gen= good businessmen ???
Yes sir , no sir ???

You seems to suggest that army general makes bad businessmen to me, and an organisation run by ex general will have followers that are basically "yes" man type. I hope I am wrong in reading your post. There are many successful companies run by people with military background, though they are not so successful ones. Our PM and some cabinet ministers were ex generals too.

I think SMRT at this stage needs some form of a tighter control and discipline similar to what's in the army. Not long ago, Desmond Kuek was interviewed in CNA, and IMO he is an action and driven man tasked to do the job many would shun away. At the minimum, I think he can communicate better with our transport minister who is himself a ex army guy.

I am not so negative with SMRT now, in fact I am seeing value emerging in this company. To me, SMRT is similar to a "too big to fail" organisation. If we can see beyond this dark period, good times will come for SMRT. Just my 2c.

If we consider the politics that swirls with companies like SMRT and all Gov linked businesses, then evaluations using EPS, cashflows, debt ratios are not as valid.

And it is not too far fetched either. The US gave money ( public funds) to banks just to keep them afloat. The result is more money distributed to share holders.

The price of the share remains "steady" despite the arithmetics indicating a sell.

The conclusion is....


SMRT is... ...too big to fail.