SMRT

[CityFarmer]

I thought about the passenger load factor being mentioned. My thoughts are that perhaps we should have more bus operators from the current two. The issue of overcrowding and the resulting public unhappiness means the incumbants are obliged to run additional services even if it is less profitable for them to do so. Consequently, this also puts a strain on their resources. Why not allow or licence a third or even a fourth bus operator to run additional services? Then you allow the operators to set their own fares and to decide on the level of service they want to provide. For example, the new operators can attempt to target a different mkt segment by providing a premium service (e.g. guaranteed seats) for higher fares for those who don't mind paying more. Or they can choose to provide a basic service together with the incumbant for the same fares. Hopefully, this will mean more buses plying the popular routes and alleviate the overcrowding issue. The key thing is to let consumers have a choice. And the bus operators may not lose out: they can pick and choose which turf they want to fight. Under the current model, SMRT and SBS have no choice.

I recall premium bus service available form suburban area e.g. Yishun and go direct to CDB, with fix fare of S$5, guaranteed and spacious seat, air-con and much fewer pick-up stops. I do not see them now, not sure whether still exist elsewhere.

[FFNow]

SMRT's latest FY profits down. Dividends cut compared to previous FYs.

http://info.sgx.com/webcoranncatth.nsf/V...00033E74A/$file/media.pdf?openelement

[shanrui_91]

due to the numerous breakdown, PTC can never allow them to raise fare now unless they totally ignore public outcry. The bus now produces 11.6m losses, while profit margin for rail has dropped below 20%. SMRT's share should start dropping more rigourously now...

[KopiKat]

due to the numerous breakdown, PTC can never allow them to raise fare now unless they totally ignore public outcry. The bus now produces 11.6m losses, while profit margin for rail has dropped below 20%. SMRT's share should start dropping more rigourously now...

Any idea why SBSTransit which has Bus Revenue ($566M) of more than double that of SMRT ($220M) is making only slightly more than half of SMRT losses? ie. SBS (-$6M) vs SMRT (-$11.6M)

Shouldn't SBSTransit be running higher losses (for Bus) since their fleet is larger and they ought to incur more losses due to rising diesel prices, staff costs,.. Although there's a 3mth difference between their year end, it ought not to have too huge an impact on rising costs.

Perhaps it's their accounting recognition employed for their segmental P&L??

[Nick]

due to the numerous breakdown, PTC can never allow them to raise fare now unless they totally ignore public outcry. The bus now produces 11.6m losses, while profit margin for rail has dropped below 20%. SMRT's share should start dropping more rigourously now...

Any idea why SBSTransit which has Bus Revenue ($566M) of more than double that of SMRT ($220M) is making only slightly more than half of SMRT losses? ie. SBS (-$6M) vs SMRT (-$11.6M)

Shouldn't SBSTransit be running higher losses (for Bus) since their fleet is larger and they ought to incur more losses due to rising diesel prices, staff costs,.. Although there's a 3mth difference between their year end, it ought not to have too huge an impact on rising costs.

Perhaps it's their accounting recognition employed for their segmental P&L??

They made $21 mil goodwill impairment for the bus ops

[KopiKat]

due to the numerous breakdown, PTC can never allow them to raise fare now unless they totally ignore public outcry. The bus now produces 11.6m losses, while profit margin for rail has dropped below 20%. SMRT's share should start dropping more rigourously now...

Any idea why SBSTransit which has Bus Revenue ($566M) of more than double that of SMRT ($220M) is making only slightly more than half of SMRT losses? ie. SBS (-$6M) vs SMRT (-$11.6M)

Shouldn't SBSTransit be running higher losses (for Bus) since their fleet is larger and they ought to incur more losses due to rising diesel prices, staff costs,.. Although there's a 3mth difference between their year end, it ought not to have too huge an impact on rising costs.

Perhaps it's their accounting recognition employed for their segmental P&L??

They made $21 mil goodwill impairment for the bus ops

Refer to pg 12 of 19, the Goodwill Impairment figures were computed after the individual segment Operating Profits.

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The drop in Profit Margin for SMRT's Train operation could be due to the start up cost of Circle Line? It may not be running at optimal passenger load yet. When I looked at SBSTransit Profit Margin for their Rail Segment, it was flat at 14.x% for FY10 and FY11.

Thinking about the impact of running the Circle Line, could there also have been some cannibalisation of commuters for SMRT? ie. commuters along Circle Line switched from Bus to MRT? Perhaps that's the main reason for the bigger losses in Bus Operation (compared to SBSTransit) plus the added need for the $21M impairment?? Bus re-routing, Bus idling, Bus running at half loads,.. possible? Anyone taking public transport along Circle Line can verify??

[shanrui_91]

what is most interesting is SMRT's decision to take an impairment on goodwill for their bus operation when it creates a record loss. Realistically, such losses will not continue forever since it is affected by diesel cost as well as inability to raise fare. This is not forgetting the fact that buses do generate advertising income as well. The $21m is a full impairment loss on goodwill for the bus operation as the remaining $13m belongs to the taxi oepration. Is this some accounting trick or is it that SMRT foresees that the bus operation will continue to be in the red for the next 5 years even after the advertisement revenue?

Circle line will definitely has an impact on their profit margin given that it is still not at its optimum level of utilisation. The bus is likely to suffer more because of the government's move for higher frequency of buses. If circle line causes the switch from bus to mrt, the bus revenue will not have increased by 3.5%
http://app.lta.gov.sg/corp_press_content...417715moo2

A quick look at the income statement shows diesel and electricity cost going up by 36% while revenue increases by 9%. Going deeper:

"Electricity cost was $29.8 million in 4Q FY2012 and $116.5 million in FY2012, compared to $19.5 million in 4Q FY2011 and $81.9 million in FY2011. The increase in electricity cost was due mainly to higher average tariff and higher electricity consumption.
Diesel cost was $12.6 million in 4Q FY2012 and $49.9 million in FY2012, compared to $11.6 million in 4Q FY2011 and $40.4 million in FY2011. The higher diesel cost was due mainly to higher diesel prices."

The $35m increases in electricity cost is equivalent to 7% of the train's revenue, while the $10m of diesel cost is 5% of the bus's revenue. The next hit will be coming from staff cost which comes from circle line. Of course, staff cost will have to increase further given that SBS bus driver earns 25% more than SMRT currently with the hike from $1375 to $1600.

[ken]

What a blue chip share !
Giving me the blues.
Dividends also cut.
Hope it can recover soon.

(vested)

[weijian]

Any idea why SBSTransit which has Bus Revenue ($566M) of more than double that of SMRT ($220M) is making only slightly more than half of SMRT losses? ie. SBS (-$6M) vs SMRT (-$11.6M)

Shouldn't SBSTransit be running higher losses (for Bus) since their fleet is larger and they ought to incur more losses due to rising diesel prices, staff costs,.. Although there's a 3mth difference between their year end, it ought not to have too huge an impact on rising costs.

Perhaps it's their accounting recognition employed for their segmental P&L??

Let me try to answer this question from a public transport rider's view point..

I believe the difference in profit margins is already showing up at the operating level - The key is the so-called 'load factor' of buses. SMRT only has 3 'bus hubs' - Woodlands, Yishun and Choa Chu Kang, located in the north. The cash cow routes (central/east MATURE estates like Toa Payoh, AMK, Bishan, Tampines to name a few) with high load factor are all owned by SBS Transit - I suspect this is the main reason for the difference in performance.

Similarly, it took NEL 3years to turn a profit - one reason would have to be the initial low load factor (remember the white elephant incident at Buangkok? ) NEL would first have to get running, people move into the northeastern estates and the load factor increases.

As an shareholder of SMRT, having been derived of the profitable routes, i have long written off the bus business.

[KopiKat]

I believe the difference in profit margins is already showing up at the operating level - The key is the so-called 'load factor' of buses. SMRT only has 3 'bus hubs' - Woodlands, Yishun and Choa Chu Kang, located in the north. The cash cow routes (central/east MATURE estates like Toa Payoh, AMK, Bishan, Tampines to name a few) with high load factor are all owned by SBS Transit - I suspect this is the main reason for the difference in performance.

Nice try! I'll take it with a huge pinch of salt.

If you take a look at the history of SMRT, then the above doesn't sound very right. Extracts from wiki,


Trans-Island Bus Services (TIBS) was formerly a public transport operator in Singapore, incorporated on 31 May 1982 by a firm of Singapore Shuttle Bus as a second full-day run bus service, following public transportation market liberalisation reform approved by parliament, which thereafter proposed the formation of another public bus service provider to establish a duopoly, which will compete with Singapore Bus Services (now SBS Transit) in 1981. TIBS Holdings' core businesses were subsumed by SMRT Corporation on 10 May 2004 following merger.

TIBS began its services on 3 April 1983 with 37 Hino RK176 buses plying on Services 160 and 167 which taken over from Singapore Bus Services, followed by the rest of the services in the northern areas, when the government gave the company exclusive operating rights in the northern towns of Sembawang, Woodlands and Yishun.

'

On 12 March 1987, TIBS acquired Singapore Shuttle Bus Pte. Ltd., a bus operator with limited routes serving mainly the city area. The next day, on March 13, TIBS became a public listed company on SESDAQ.

On 2 May 1990, TIBS Taxis Pte. Ltd., a subsidiary of TIBS, was formed to operate taxi services. It is the only company in Singapore to operate a fleet of entirely large capacity taxis. It also operates the world-famous London taxis.

Another subsidiary, TIBS Motors Pte. Ltd., was set up in 1990 to provide workshop services and carry out business as a distributor and agent for some motor vehicles.

In 1991, TIBS underwent a restructuring, bringing its subsidiaries under TIBS Holdings Ltd..

In 2001, it merged with Singapore MRT and became a subsidiary of the SMRT Corporation.

On 10 May 2004, in a S$2.5 million rebranding exercise the name "TIBS" was changed to SMRT Buses Limited (bus services) and SMRT Taxis (taxi services). The livery of all buses were subsequently painted to red from yellow.


Prior to 2001, TIBS was running the bus operations in the so-called 'non-matured' estates and 'non-cash cow' routes and must have still been making profits (TIBS wss listed since 1987 and I kind of remembered it was a profitable co., have to dig up their financials to verify).