New Rail Financing Framework has come for SMRT

SMRT New Rail Financing Framework

Today, 15th July 2016, SMRT announced the proposal of sale of its asset to Land Transport Authority (LTA). New rail financing framework has been in talks for years since many years back where there was an island wide outage of the SMRT rail system. The new rail financing framework was first implemented in 2011 for the Downtown Line (DTL) MRT System.

Asset Light Business Model

After the sale of the assets, SMRT will operate under an asset light model where they will focus on being a train operator providing quality service to commuters and maintaining the trains to ensure smooth operations.

15 Years Operating License

Under the new license, SMRT will operate for 15 years starting 1st October 2016.

Value of Asset

Currently, SMRT owns North-South, East-West, Circle Line and Bukit Panjang Light Rail Transit. The asset is worth Net Book Value of S$991 million (S$1,060 million including GST) as at 30 September 2016. Land Transport Authority (LTA) will pay the amount over 3 years.

Impact to Investors

As of 30th September 2016, SMRT has a debt of S$762 million. The proceeds from the sale will be used to repay the debt. S$159 million will be paid to IRAS as tax.

No special dividends will be paid for investors!

On the speculative side, I am expecting SMRT share price to soar when market opens tomorrow!

SMRT Non Fare Business Saved The Day

SMRT Logo

SMRT announces its 3Q FY2016 results on 25th January 2015. Similar to 2QFY2016, operating expenses increased 2.4% to $303.0 million due to higher repairs and maintenance costs, staff costs, depreciation, and other operating expenses.

SMRT Results 3QFY2016

Fare Business

The group’s rail operations (Train and LRT) posted a combined loss of $1.1 million in YTD FY2016 as the increase in operating expenses outpaced revenue growth.

Bus operations posted an operating profit of $3.4 million in 3Q FY2016 on the back of higher revenue, training grants, reliability incentives and lower diesel costs, partially offset by higher staff costs, depreciation, and repairs and maintenance expenses.

Non-Fare Business

Taxi operating profit increased to $4.8 million and Rental operating profit increased to S$21.8 million.

This was due mainly to:

  • Higher taxi rental contribution and more early retirement of taxis in 3Q FY2015.
  • Higher rental revenue contribution from train stations and bus interchanges.

Things to Note

Rail Financing Framework

No news since the last mention which causes the surge in share price (SMRT Shares Surges on Hopes of Rail System Reform).

Bus Services License Expiry

SMRT is in discussion with the authorities on the contract terms for the remaining bus services beyond the license expiry in August 2016.

 

SMRT Shares Surges on Hopes of Rail System Reform

SMRT Trains

SMRT shares surged to a day high of S$1.575 on Friday, 4th December 2015 after our transport minister Mr Khaw Boon Wan spoke about integrating the roles of the Land Transport Authority (LTA), which currently designs and builds the rail system, and the rail operators that maintain the system.

If you have been following up on discussions related to the rail reform framework, if the policy or deal goes through, the government will take over SMRT’s rail assets. This will turn SMRT into a pure operator which means that SMRT will no longer have to fund the rail CAPEX. Read More