SBS Transit

[Zelphon]

Did a check on SBS's cost drivers and came up with the following ranking/percentages based on 9M 2010 results.

(percentage expressed as cost divided by revenue)

Staff Cost @ 40.8%
Fuel & Electricity @ 18.3% (already gone up 7.4% wrt 9M 2009)
Repair & Maintenance @ 11.9%
Other cost @ 8.3%
Depreciation expense @ 6.5% (up 20% wrt 9M 2009)
Premises Cost @ 4.6%

With the Singapore economy at close to full employment, it will drive up staff cost. Hence, i expect staff cost to increase in 2011.

In the short term (1H2011), cost will go up in multiple fronts (staff cost, fuel & electricity, depreciation). Therefore, margin will be hit.

But in given "some time" to petition to the PTC (as Jon-San has earlier pointed out) prices may be adjusted upwards. I do not have the expertise nor experience to estimate the time line. Point here is that margin will be hit first before prices are allow to be increased.

SBS already hiring so-called CHEAPER drivers from China....

How can staff cost be so high ????

They better re-look into their internal remuneration of staff...

Bet there is some useless fat cat in the upper management...

A typical Govt-linked company...

[ichiran]

I'm not surprised at the high and increasing pressures on labour costs of a PTO like SBST.

Even though the bus captains from China may be "cheaper", the company still has to take care of their housing. Also, having come all the way from China, these bus captains are more hardworking, and tend to ask/expect to work longer hours through working overtime/longer shifts/duties. All these costs adds up....In a way, I think SBST recognises this problem and is trying to cut down on the amount of overtime allowances, albeit with much difficulty.

Overall, in my opinion, the economics of SBST's business is not in its favour, i.e. capital intensive, highly regulated, limited growth prospects with LTA taking the role of central bus planning soon... and does not appeal to me as an investor!

[lonewolf]

I think its worth bearing in mind when comparing staff cost to take into account the Job Credit scheme introduced by the govt in 2009 Budget. With its removal in 2010, comparison of the 2010 and 2009 staff cost will inevitable be skewed upwards.

I'm not sure if SBST provides housing for its employee from overseas; in fact I'm pretty sure it does not (but let me get back to you guys on this)

Overtimes for a company like SBSTransit is inevitable due to the operations nature of its business. There is however a limit to the no of OT hours that a driver (foreign or otherwise) can worked in a week which is 72 hours a month (Source: MOM regulation on Hours of Work, Overtime & Rest Days). So its not upmto the drivers to 'ask/expect' overtime. They can express a willingness to do so and hope one of his colleagues report sick or take urgent leave etc.

As for useless fat cat in upper management, I think a lot of companies has this issues so its not unique to SBSTransit.

I think its a fallacy to equate that OT will always drive staff cost up. OT is actually a good tool to address short-term fluctuations in manpower requirements; and can be cheaper than employing permanent and ultimately redundant staff. I know for a fact that SBSTransit does not really pays it rank-and-file employee well so its not an area of concern for me.

Its true that SBSTransit operates in a capital intensive and highly regulated environment. Its also precisely for these reasons that no other bus companies in Spore want a piece of the pie; despite MOT's many efforts in the past to entice more competition in the sector.

For me, SBSTransit definitely makes for a more compelling case for investment compared to the many other SGX-listed companies. (Not vested)

[newborn1000]

How can you guys not see it..........population in singapore will rise to 6million......

This is the perfect opportunity for these "slow growers" stocks to rise capital and and grow..........

Stocks like the 3 telecos, smrt, sbs will benefit..........probably a lot more examples which companies will benefit from a population boom.........

Though like i always say, buy during recession........

[mikh]

Reason given looks strange to me, but for the interest of those on financial implications, " Public transport fare review exercise deferred till Q4" . http://www.channelnewsasia.com/stories/s...68/1/.html. Why let a few stations dictate the majority?

My opinion is that SBST will be largely revenue neutral in terms of fuel price. It is in its interest to do so and the regulator's as well. The impact on bus demand should be more a function of alternative transport mode cost/time efficiency available and the ongoing demand. Don't think fuel costs by itself will impact SBST profitability.

[Blackjack]

Reason given looks strange to me, but for the interest of those on financial implications, " Public transport fare review exercise deferred till Q4" . http://www.channelnewsasia.com/stories/s...68/1/.html. Why let a few stations dictate the majority?

The article already explained it well. It is to "minimise any inconvenience and confusion" in case both fare reviews lead to upward revisions.
Elections are also around the corner, but I'm digressing.

[mikh]

Reason given looks strange to me, but for the interest of those on financial implications, " Public transport fare review exercise deferred till Q4" . http://www.channelnewsasia.com/stories/s...68/1/.html. Why let a few stations dictate the majority?

The article already explained it well. It is to "minimise any inconvenience and confusion" in case both fare reviews lead to upward revisions.
Elections are also around the corner, but I'm digressing.

lol, maybe elections is a better reason indeed.

[Musicwhiz]

First thing I thought about, coincidentally, was elections when I read the PTC announcement. I know this forum is not meant to be a political one, but I can't help feeling that such financial decisions exert quite a lot of influence on the voters and their perception of the Govt.

The same goes for property "cooling" measures. If prices were allowed to rise unabated, guess who will be the ones getting blamed for it?

[mrEngineer]

I think its worth bearing in mind when comparing staff cost to take into account the Job Credit scheme introduced by the govt in 2009 Budget. With its removal in 2010, comparison of the 2010 and 2009 staff cost will inevitable be skewed upwards.

Not all companies would use the Jobs Credit Scheme to offset staff cost or SGA but instead recognise it under Other or Extradordinary Income

[namaste]

First thing I thought about, coincidentally, was elections when I read the PTC announcement. I know this forum is not meant to be a political one, but I can't help feeling that such financial decisions exert quite a lot of influence on the voters and their perception of the Govt.

The same goes for property "cooling" measures. If prices were allowed to rise unabated, guess who will be the ones getting blamed for it?

I have the same feeling when i read about the PTC postponement announcement. Afterall, train and bus are deemed to be services for the general public and an emotional issue for most. The government would not want this to come into play during the elections when the are positioning themselves to tackle the rising inflation issue.

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[quote='mikh' pid='5820' dateline='1296451114']
Reason given looks strange to me, but for the interest of those on financial implications, " Public transport fare review exercise deferred till Q4" . http://www.channelnewsasia.com/stories/s...68/1/.html.

So the stage is set for SBS for this FY - i.e. cost will increase on multiple fronts (see latest SMRT report on fuel prices contributing to loss in their bus operations).

While prices can only be reviewed in Q4 2011.

Hence, I expect profits to decrease during this FY wrt last.