Review on SMRT latest result.
In summary, revenue up, but profit down due to higher expenses. It is no surprise to anyone I assume...
(not vested)
SMRT posts 55% lower Q1 net profit of $16.3 mil
SMRT Corporation’s first quarter net profit fell 55.2% to $16.3 million on higher costs.
Revenue for the same period ended June 30, 2013 rose 3.5% to $284.8 million due mainly to higher train, rental and taxi revenue.
However, operating profit declined 49.4% to $22.2 million as continued increase in operating expenses for the fare business is not being offset by fare increases, resulting in lower train profit and higher bus and LRT losses.
http://www.theedgesingapore.com/the-dail...3-mil.html
i'm surprised the share is holding up so well actually.
well, MRT is a bread and butter service, and with the rail network and stations expecting to double by 2020, i see no reason why SMRT should not be WORTH more than it is now..
except for the populist policies imposed by sg garhment onto it for the past 2 years....
Long term wise, it still looks cashcow to me! ...
just need to find out what is the required rate of returns imposed by LTA on SMRT.
the pricing model is usually "CPI - X" imposed on SMRT.
With this pricing cap, is SMRT still able to earn full "cost recovery + the required rate of returns" ?
Then u can have a good sense whether this would be a cash cow. dont think it will ever be a cash cow since any surplus is supposed to be ploughed back for infra renewal/expansion plus maintenance. Map out the retaining earnings vs the maintenance regime expenses, etc
LTA will not allow it to become a cash cow
(31-07-2013, 04:35 PM)Stockerman Wrote: [ -> ]...
LTA will not allow it to become a cash cow
To add on, the political arena must also be considered. We will just make so much noice for even a 10 cents fee hike. I dont think anyone wants to add to the displeasure for the remaining 60.1%. It is very very hard for smrt to raise fares, politically restrained.
Otherwise, i totally agree it has a decent business.
With dwindling EPS and by extension, dwindling dividends to shareholders, they might as well "nationalize" it...
Come to think of it, it is already "nationalized" in a way, if u know what I mean. Who are the big shareholders of SMRT?
We have a circular logic here. Privatized but yet owned by "Govt".
Does this lead to greater cost efficiency in the long term? If SMRT is a statutory board and can be as cost efficient as a listed commercial entity, I think people would rather that it remain a Statutory Board.
(31-07-2013, 11:53 PM)Stockerman Wrote: [ -> ]If SMRT is a statutory board and can be as cost efficient as a listed commercial entity, I think people would rather that it remain a Statutory Board.
SMRT has never been a truly independent commercial entity. Their main source of incomes are regulated and their service quality are also regulated.
Limited revenue increase and unlimited cost increase. It is just a double whammy for them.
(31-07-2013, 04:04 PM)brattzz Wrote: [ -> ]well, MRT is a bread and butter service, and with the rail network and stations expecting to double by 2020, i see no reason why SMRT should not be WORTH more than it is now..
except for the populist policies imposed by sg garhment onto it for the past 2 years....
Long term wise, it still looks cashcow to me! ...
How can it be a cashcow when it is bleeding more than $400M of Free Cash Flow?
From OCBC:
SMRT's 1Q14 results came in below our expectations as revenue growth slowed while higher staff and depreciation expenses caused operating and net profit to decline 49.4% YoY to S$22.2m and 55.2% YoY to S$16.3m respectively. In the coming quarters - and in the absence of fare adjustments - we expect this trend to persist as higher operating expenses continue to compress margins. In addition, recurring service disruptions suggest elevated repair and maintenance expenses. With the lack of any immediate catalysts (a switch to the new rail financing framework within FY14 is unlikely in our view), we lower our FY14 forecast figures yet again and our DDM-derived fair value estimate falls to S$1.30 (S$1.45 previously). Downgrade to SELL. (Lim Siyi)
I wonder what make them think that a switch to the new rail financing framework within FY14 is unlikely? I thought analyst always like to say things is a more kia su way such as: "barring ............., we think that ......."