Comfort Delgro

[lonewolf]

It will be CDG's listed subsidiary SBS Transit that will be tendering for the downtown line; not CDG directly. But CDG does a bug chunk of its revenue from SBSTransit (not sure about the percentage now but it should still be significant I guess) so there will be some spillover effect to CDG.

The thing about being awarded the rail operating licensing is that it can be a double edge sword. SBSTransit took around 5 years to break even on North-East line (becos the population build up projection was screwed). SMRT is now bleeding on the CircleLine and when the rest of the line opens this year, you can probably expect them to bleed a bit more. But SMRT still have the lucrative NSL and EWL to cover the shortfall of Circle Line in its initial years.

If SBSTransit wins DTL, we can probably also expect it to bleed for a few years. Qn is whether NEL can cover the loss making operations for DTL. In the case of NEL, the bus side was covering up for the loss. If more bus routes are rationalised with the opening of DTL and less buses are running, where would the revenue comes for SBSTransit?

I was under the impression that LTA wanted to set up a 3rd rail operator company to run the DTL. Or was opened to the idea of having a foreign rail operator, but it seems they have scraped their plan and possibly only SMRT and SBSTransit will be invited to tender for the DTL - for the due process to take place. I think they should just forget about putting on a show, ask the Minister for a waiver of tender and just award the operator license to SBSTransit.

One other thing, LTA intends to shorten the rail operating licensing (I think from the current 30-40 yrs to 15 yrs. Source) starting with the DTL. Imagine if SBSTransit takes another 5 yrs to breakeven and get only 10 yrs to recoup, then it may not be as lucrative as imagined initially.

One last thing, the DTL is a Medium Rail line and will be running with 3-carriages configuration, just like Circle line. Less carriages means less people per trip. And less people means less revenue.

(not vested in SMRT, CDG or SBSTransit)

[pianist]

i am impressed with your wealth of knowledge in the rail business and development..hopefully SBS will win the tender...else it really makes SMRT a monopoly

[mikh]

It will be CDG's listed subsidiary SBS Transit that will be tendering for the downtown line; not CDG directly. But CDG does a bug chunk of its revenue from SBSTransit (not sure about the percentage now but it should still be significant I guess) so there will be some spillover effect to CDG.

The thing about being awarded the rail operating licensing is that it can be a double edge sword. SBSTransit took around 5 years to break even on North-East line (becos the population build up projection was screwed). SMRT is now bleeding on the CircleLine and when the rest of the line opens this year, you can probably expect them to bleed a bit more. But SMRT still have the lucrative NSL and EWL to cover the shortfall of Circle Line in its initial years.

If SBSTransit wins DTL, we can probably also expect it to bleed for a few years. Qn is whether NEL can cover the loss making operations for DTL. In the case of NEL, the bus side was covering up for the loss. If more bus routes are rationalised with the opening of DTL and less buses are running, where would the revenue comes for SBSTransit?

I was under the impression that LTA wanted to set up a 3rd rail operator company to run the DTL. Or was opened to the idea of having a foreign rail operator, but it seems they have scraped their plan and possibly only SMRT and SBSTransit will be invited to tender for the DTL - for the due process to take place. I think they should just forget about putting on a show, ask the Minister for a waiver of tender and just award the operator license to SBSTransit.

One other thing, LTA intends to shorten the rail operating licensing (I think from the current 30-40 yrs to 15 yrs. Source) starting with the DTL. Imagine if SBSTransit takes another 5 yrs to breakeven and get only 10 yrs to recoup, then it may not be as lucrative as imagined initially.

One last thing, the DTL is a Medium Rail line and will be running with 3-carriages configuration, just like Circle line. Less carriages means less people per trip. And less people means less revenue.

(not vested in SMRT, CDG or SBSTransit)

I remember reading that an announcement that major infrastructure costs such as the trains will now be borne and owned by LTA (or govt). This means lower asset recovery costs and lower (capital-wise) barriers to entry for other operators. Breakeven will come faster.

(vested)

[Nick]

I don't think the DTL contract will have such a big impact on their bottom-line. CDL overseas acquisitions (in Australia and Asia) will be its growth driver.

[lonewolf]

i am impressed with your wealth of knowledge in the rail business and development..hopefully SBS will win the tender...else it really makes SMRT a monopoly

SMRT could and should have been the defacto and monopoly rail operator in Spore.

Some background: When the ridership numbers for NEL was not coming in and SBSTransit was bleeding; the govt was re-thinking about the wisdom of enforced competition and open to the idea of having a single rail operator.

This was where the current SMRT CEO MS Saw Phaik Hwa makes a strategic and arrogance blunder when she loudly proclaim for SBSTransit to make SMRT an offer it cannot refuse for taking over the loss-making NEL.

She was practically asking SBSTransit to beg SMRT to take NEL off its book. The way I see it then was that it was a mistake. SMRT should have been the one to make SBSTransit an offer SBST cannot refuse to take over NEL. She wanted to get NEL cheap and thought SBST would blink first. credit to SBSTransit (and CDG's management) for sticking to their gun.

Sure doing so have its short term pains for SMRT but a lot of the manpower and training investment were already paid by SBSTransit so SMRT would have taken over from SBST a fully-trained manpower set-up without splashing out cash on training cost for the ops and maintenance staff. Most important of it, it would have guaranteed SMRT to be the only rail operators to all the future MRT lines the govt will built till 2050.

Its probably the greatest corporate blunder in the history of SMRT; Ms Saw with her retail background simply did not have the operations acumen needed to see the opportunity that was presented to her. The fact that the rest of SMRT Board of Directors/Senior Mgmt also failed to see it lead me to the conclusion that they are a bunch of idiots. Harsh but that my opinion and why I never bother to invest in SMRT.

[pianist]

I see thanks for sharing the business background story about the NEL line..I didnt know there was such a situation/opportunity presented to SMRT and they missed it.

as a shareholder of SBS, I am thankful SBS mgt had the foresight to hold on to their guns...

[Ben]

Between the two (SMRT and CD), I would definitely prefer CD.

CD is currently the no 2 largest land transport operator in the world, and their mission is become no 1.

About 50% of CD revenue is generated in Singapore, and their target is to have 70% of oversea revenue by 2015.

I admire them for explicitly stating these targets which go to show their confidence, focus and determination of the management.

In contrast, SMRT has been rather elusive in their plan. Their growth, to a large extend, is not due to smart management decisions, but rather a natural demand for their services. They did tried to venture overseas by providing engineering service to Dubai, but the business was short lived when Dubai runs into financial troubles.

In my opinion, Ms Saw greatest contribution to SMRT is to turn the company from a pure transport player to a mix of transport/retail company. This is probably due to her retail background. Other than this, I don't see how she can bring SMRT to the next level like what CD's management is capable of doing.

I am vested in both, but am gradually switching from SMRT to CD.

[mikh]

OT. I recall SMRT insisting for many years that they were unable to increase the frequency of train services. However since the current tranport minister came in, there has been ways found to increase the frequency, albeit after much clamour. As an outsider, i cannot tell if economics was the real reason behind the original excuse; even if more trips might have probably meant more profits. Either way, the turnaround leaves one un-impresssed.

Such attributes of surviving in a duopoly with govt links does not necessary make a company more able to compete abroad in a different environ. In this respect, CD has done better.

Nevertheless, the market has rewarded SMRT stockholders well in last 2 years. Ben, you seemed to have done well and called it right

[lonewolf]

In contrast, SMRT has been rather elusive in their plan. Their growth, to a large extend, is not due to smart management decisions, but rather a natural demand for their services. They did tried to venture overseas by providing engineering service to Dubai, but the business was short lived when Dubai runs into financial troubles.

I believe it was more than an engineering service. It includes an operation component where they need to operate an LRT-like system in Dubai. I laughed when they won the contract cos I know that the manpower cost alone would probably be enough of a drag on their margin. I suspect SMRT knows it and went with it anyway; just to 'boast' to people that they are also venturing overseas.

In my opinion, Ms Saw greatest contribution to SMRT is to turn the company from a pure transport player to a mix of transport/retail company. This is probably due to her retail background.

Yes. I will give her credit for that. But not all SMRT's retail venture was a success. I'm still scratching my head why Xchange at Dhoby Ghaut was a failure. I will admit that some of the retail component of Circle line is quite impressive.

OT. I recall SMRT insisting for many years that they were unable to increase the frequency of train services. However since the current tranport minister came in, there has been ways found to increase the frequency, albeit after much clamour. As an outsider, i cannot tell if economics was the real reason behind the original excuse; even if more trips might have probably meant more profits. Either way, the turnaround leaves one un-impresssed.

There really is a technical reason behind this one. I believe the signalling system on SMRT has to be upgraded to cater for the increased frequency. Some part of the system has been in operations for > 20 years. Ultimately it may have been that SMRT did not want to foot the bill for the upgrading. Maybe Mr. Lim quietly asked LTA to food the bill for the upgrade??

Or maybe SMRT was reluctant to do it in the past because running more trips means getting more trains on the tracks. And maybe they dun have a buffer to do that until more trains were purchased?

[violinist]

This CD breakout is long overdue.