SMRT

[greengiraffe]

SMRT bullish on non-fare income growth

CEO also counting on change to financing framework
Published on May 3, 2014 1:30 AM


SMRT's non-fare income includes advertising revenue and rentals. It has more than the 36,000 sq m of commercial retail space at its train stations. This includes the Esplanade Xchange. -- ST FILE PHOTO

By Christopher Tan Senior Transport Correspondent

TRANSPORT operator SMRT Corp's growth in the medium term could well be propelled by its non-fare businesses, and a change in the way public transport is financed and operated in Singapore.

Chief executive Desmond Kuek said the company's non-fare businesses, such as advertising and rental, are growing steadily.

For the year ended March 31, 2014, operating income from its non-fare businesses amounted to $109.2 million - more than total income, which was dragged down by a $25 million loss in the fare businesses.

The breakdown was starkly different 10 years ago. For the year ended March 31, 2004, non-fare income amounted to $33.9 million - or just one-third of total income.

The Sports Hub will also boost SMRT's non-fare income. The company has tied up with NTUC FairPrice to operate 41,000 sq m of commercial retail space - more than the 36,000 sq m it has in its train stations - at the sports venue, due to open next month.

In the same vein, Mr Kuek said SMRT is continuing to explore international opportunities and boosting its engineering capabilities.

Speaking at a post-results conference yesterday morning, he said "we're very optimistic" that the non-fare side will "generate sustainable growth for the company".

He said this in response to a question on whether SMRT would ever return to the 40 per cent margins it enjoyed in its heyday. For the year just ended, its operating margin stood at 22 per cent.

Mr Kuek also said a shift to a new rail financing framework will bode well for the company's long-term sustainability.

The change will see the Government assuming ownership of rail operating assets and being responsible for their timely replacement.

It will free the operator of holding hefty assets in its books, depreciation charges and lumpy capital expenditures.

"We've put in our proposal, and are awaiting response from the authorities," Mr Kuek said.

The chief executive added that a contestable bus industry - which the Government has been studying for about six years now - will also be positive for SMRT.

The Temasek Holdings-owned company has long been incurring losses on its bus business, which it inherited when it acquired Tibs Holdings in 2001.

Analysts blame SMRT's small route parcel for this. A contestable bus regime - where companies bid for routes - could give the company an opportunity to expand its bus network.

Mr Kuek was less optimistic about another loss leader: the Bukit Panjang LRT. He said the line has incurred losses from Day One, and is likely to continue to do so.

christan@sph.com.sg