SMRT

[CityFarmer]

I don't understand the discussion regarding the retail and advertising business. Why would LTA raise capital to buy over this part of SMRT? Isn't it simpler to allow the current agreement to run its course?

The same rationale as the bus operation? LTA has the choice to wait for the existing contract expire before the new model (in 2028? more than a decade away), or negotiation for an early deployment.

[egghead]

I can understand the bus operation part as it relates directly to transport. As early as 2012, Govt already allocated $1.1 billion to expand existing bus capacity; and followed up with the new financing framework now.

I think it will be difficult for LTA to buy over SMRT retail assets. LTA will need justification to raise additional funds; and SMRT will not be wiling to part with them cheap.

[specuvestor]

As per my post below, as long as SMRT runs the rail, they will have the retail asset.

I doubt the govt will rock the boat too much. 14 years is short from the bigger scheme of things. But in the short term they have to solve the problem as opmi mentioned.

Now the issue is how to split the maintenance cost and get things right, and the fact that retail asset supposed to subsidise the rail business, so can't just talk about the maintenance cost purely from the rail business and try to get a valaution from there. IMHO that's where the disparity is coming from

Because the rail screwups are costing their bosses bosses votes. And they cannot admit that this 'market pricing to public goods model' is failing.

^^ the plot thickens in addition to what I posted in another thread:

They can give them bigger alternative incomes like advertisement and rental to cover some of the public transport operating cost.

Their focus continue to be that they are losing money on public transport. Shareholders who cheer that they will soon get rid of the money losing transport business should consider whether the advertising and rental business are actually part of the package.

SMRT license is till 2028, so are their leases.

http://www.valuebuddies.com/thread-5391-...l#pid88482

[freedom]

Correct me if I am wrong. Many of the stations belong to SMRT, not LTA or the government. And most retail and part of the advertisement are tied to the stations, not the rail track or the trains. Plus, the rail financing framework concentrates on rail tracks, trains and many other things, but not cover the stations. So I don't see that SMRT loses most of its retail operations. But for train advertisement, probably it will always belong to whoever runs the trains.

[CY09]

Correct me if I am wrong. Many of the stations belong to SMRT, not LTA or the government. And most retail and part of the advertisement are tied to the stations, not the rail track or the trains. Plus, the rail financing framework concentrates on rail tracks, trains and many other things, but not cover the stations. So I don't see that SMRT loses most of its retail operations. But for train advertisement, probably it will always belong to whoever runs the trains.

The station belong to lta/mot. sMrt is taking a lease/license from them

[muns]

Correct me if I am wrong. Many of the stations belong to SMRT, not LTA or the government. And most retail and part of the advertisement are tied to the stations, not the rail track or the trains. Plus, the rail financing framework concentrates on rail tracks, trains and many other things, but not cover the stations. So I don't see that SMRT loses most of its retail operations. But for train advertisement, probably it will always belong to whoever runs the trains.

Hi freedom,

It seems like LTA also owns the station. Its stated in their AR 2014:

"While SMRT Trains owns and maintains the operating assets, the infrastructure of the NSEWL (which includes tunnels,
tracks, viaducts and station structures) remains the property of LTA and is leased to SMRT Trains at a nominal annual fee
or such other amount which LTA may stipulate in the future on the first working day of each calendar year during the term
of the lease."

The question would be if the extensions to the station also fall under the jurisdiction of the "station structure"? Their agreement was termed as a license and operating agreement. From their definition, Operating Assets would refer to only the trains I suppose
___________________________________________________________
Finding the Value in a Speculative World
http://www.valueinvestasia.com

[CityFarmer]

Correct me if I am wrong. Many of the stations belong to SMRT, not LTA or the government. And most retail and part of the advertisement are tied to the stations, not the rail track or the trains. Plus, the rail financing framework concentrates on rail tracks, trains and many other things, but not cover the stations. So I don't see that SMRT loses most of its retail operations. But for train advertisement, probably it will always belong to whoever runs the trains.

Hi freedom,

It seems like LTA also owns the station. Its stated in their AR 2014:

"While SMRT Trains owns and maintains the operating assets, the infrastructure of the NSEWL (which includes tunnels,
tracks, viaducts and station structures) remains the property of LTA and is leased to SMRT Trains at a nominal annual fee
or such other amount which LTA may stipulate in the future on the first working day of each calendar year during the term
of the lease."

The question would be if the extensions to the station also fall under the jurisdiction of the "station structure"? Their agreement was termed as a license and operating agreement. From their definition, Operating Assets would refer to only the trains I suppose
___________________________________________________________
Finding the Value in a Speculative World
http://www.valueinvestasia.com

Base on AR2013, operating assets are mostly the followings, for those interested.

"These assets include trains, permanent way vehicles, power
supply equipment and cabling, supervisory control system,
escalators and lifts, platform screen doors, environmental
control system, electrical services and fire protection system,
signalling system, communication system, automatic fare
collection system and depot workshop equipment."

[CityFarmer]

As per my post below, as long as SMRT runs the rail, they will have the retail asset.

I doubt the govt will rock the boat too much. 14 years is short from the bigger scheme of things. But in the short term they have to solve the problem as opmi mentioned.

Now the issue is how to split the maintenance cost and get things right, and the fact that retail asset supposed to subsidise the rail business, so can't just talk about the maintenance cost purely from the rail business and try to get a valaution from there. IMHO that's where the disparity is coming from

To pull-out few numbers on the "negotiation" between LTA/SMRT
- In AR2013, Total PPE value was S$1.4 billion, not all are rail assets. My ballpark figure of rail asset book value is approx S$1.0 billion
- LTA is advocating the SMRT future liabilities of S$2 billion should be part of the negotiation
- The market cap of SMRT is slightly less than S$2.5 billion, with a share price of S$1.625

The book value was 1.0 billion. LTA is asking a 2 billion discount due to future liabilities. LTA, in fact, is asking SMRT to transfer back the asset with minimum cost

In the balance sheet of SMRT (AR2013), PPE cost is more than half of total asset. I doubt SMRT will release the operating asset, without a comfortable compensating amount, and turn itself into a service base company.

The negotiation has little chance to success, IMO. Life will be as usual, till 2028

(not vested)

[freedom]

I don't mean all the stations belong to SMRT, but I remember that SMRT bought many stations especially those got retail potential ones from LTA already.

for example from Annual report of 2013.

"In April 2013, SMRT purchased the operating assets associated with the Changi Airport Extension and the Dover station for approximately $93 million. "

So at least Dover station belongs to SMRT. I can't remember exactly how many stations have been purchased by SMRT from LTA, but should be more than just Dover.

[specuvestor]

None of the MRT stations belong to SMRT. Please read the definition of operating assets as per posted by CF.

NBV of Bus is ~$200m and rail is ~$800m... from the horse's mouth