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.
In my previous post (Summary of September 2015 Transactions), I mentioned about waiting for the opportunity to exit this stock and I have been following my plan. In the recent stock rallies, I have significantly reduced my holdings in SMRT. The current surge in SMRT stock price will certainly pose an opportunity for me to further reduce my stake.
My Reasons for Selling
- Pure investment mistake in early days, believing SMRT is a stable blue chip.
- With SMRT turning into a pure operator, it will mean that any other competitor can bid for running Singapore’s train system.
- Fare price in Singapore are controlled by the government, thus operators have little free play although other revenue can be from advertising, rentals.
- Poor dividend yield of estimate 2 percent for recent years. There are better places to park your money.
LTA must prepare to take over rail operations, says Khaw (Today, 4th December 2015)
SMRT, SBS shares soar as Khaw ignites revamp hopes (The Business Times, 4th December 2015)
Singapore’s SMRT shares soar on hopes of rail system reform (Reuters, 4th December 2015)
SGX queries SBS Transit, SMRT after share prices surge (Today, 5th December 2015)