SMRT

[muns]

Going forward, was there any mention if SMRT would still be able to retain their advertising and leasing business or would the new policy just affect the transportation assets?
_______________________________________________________
Finding the Value in a Speculative World
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[greengiraffe]

http://www.businesstimes.com.sg/premium/...9-20140712

PUBLISHED JULY 12, 2014
LTA says SMRT has $2b in obligations until 2019
BYSAMUEL EE
samuelee@sph.com.sg

RAIL operator SMRT's financial obligations for the next five years are estimated to be about $2 billion, a sum that includes buying over operating assets and paying for re-signalling works - PHOTO: ST
RAIL operator SMRT's financial obligations for the next five years are estimated to be about $2 billion, a sum that includes buying over operating assets and paying for re-signalling works. The Land Transport Authority (LTA) revealed this yesterday, after Transport Minister Lui Tuck Yew was asked in Parliament this week for the details of the Rail Financing Model proposal submitted by SMRT in April.
In his reply, he had said that he was unable to disclose details because discussions between SMRT and LTA on the transition to the new rail financing framework were confidential. "However, I understand that there remains a wide gap between SMRT's expectations and LTA's position," he said.
"One of LTA's considerations is that the valuation of SMRT's business must take into account not only the value of the existing assets it owns, but also its current and future capital expenditure obligations, as required under the existing licences."
The LTA said that the value of the existing assets SMRT owns, as well as its financial obligations under its existing licences, have to be taken into account when considering SMRT's proposal.
An LTA spokesman explained that, for example, under the current financing framework, rail operators own the operating assets of the system and are responsible for procuring additional operating assets to meet ridership growth. "As part of this responsibility, SMRT is obliged to invest in more trains for capacity enhancements over the next few years."
The spokesman added that these include additional trains on the North-South and East-West Line (NSEWL), the Circle Line (CCL) and the Bukit Panjang LRT (BPLRT).
"In addition, it has to pay for the re-signalling project for the NSEWL, although it may apply for a Replacement Grant to offset part of this replacement cost. These are all major investments to which SMRT has either committed or is already in the midst of implementing, and add up to about $900 million," the spokesman noted.
The LTA added that beyond this, SMRT may need to buy even more trains to meet ongoing ridership growth and enhance service levels for commuters.
Under the current CCL licence, SMRT also has to buy over from LTA the first set of operating assets in 2019 at an estimated net book value of $1.1 billion. And under the BPLRT licence, SMRT would have to buy over the first set of operating assets in 2015, at an estimated net book value of $40 million.
All these run up a bill of about $2 billion between 2014 and 2019.
One analyst speculated that SMRT's proposal was too high, which was why the LTA decided to respond in detail. "It seems that SMRT is asking for way over what the LTA feels it is entitled to," he said. "This is the 'wide gap' that the minister is referring to."

[specuvestor]

^^ 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]

The biggest gap, I guess, is the valuation model. The government probably prefers book value. But there is no way that SMRT agrees that. SMRT probably prefers replacement cost or operational model. Though SMRT originally bought the assets from the government at book value, it is obvious that the assets are worth much more after so many years. For example, the cars. Many of the old cars are of little value on the book, but they can continue to run for another 5 years. It might not be worth of a new car, but could well fetch half of the value of a new car.

There is no point of talking about obligations. Whatever the obligations is, if SMRT were to bear the cost, it would sell it to the government at least at book value. Therefore, SMRT will increase it's asking price by the same amount. We are not talking about the government taking over SMRT, but the operating assets. SMRT's obligations has little bearings on the talk.

[Ben]

Attended SMRT’s AGM today. The highlight of the meeting is regarding the new proposed rail framework which the company is currently in discussion with the relevant authorities. However, regardless of the outcome, SMRT will continue to run the existing lines until it’s respectively licences for the respectively lines expire. This means that SMRT will continue to control all the shops and malls located in those stations under its control. This also means that, regardless of what the outcome of the new framework is, SMRT is likely to continue collecting rental and advertising revenue until its licence expire. This is unlike the bus framework where 20% of the bus routes are now open up for open tender, and the other 80% are to be renegotiated again. I read all these as positives for SMRT and would like to share it with buddies here.

Having invested so much resources into building up its non-fare businesses, I doubt they will ever let it go easily.

SMRT served buffet after the meeting, the spread and quantity is quite decent, but as usual, many SH were indecent.

[CY09]

I can't say much. But my experience with licenses and tenancy is that there may be special clauses inserted into contracts which allows for early termination by either party (Landowner or licensee) writing in.

[CityFarmer]

I can't say much. But my experience with licenses and tenancy is that there may be special clauses inserted into contracts which allows for early termination by either party (Landowner or licensee) writing in.

The non-fare business is a supplementary income on the operation right of MRT stations. The operation right is a business contract, which early termination clauses, if any, will not be as loose as tenancy agreement, and should come with a hefty fee.

I doubt LTA will terminate or amend the existing contract, without SMRT agreement. In other words, without SMRT agreement on new terms and conditions, existing contract will continue.

(not vested)

[opmi]

At some point, It will be cheaper to buy out SMRT than its rail assets.

[egghead]

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?

[opmi]

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?

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