SBS Transit

[CityFarmer]

Thanks Nick for the sharing. A nice exchanges of opinion and view here.

I have no doubt on the sustainability and feasibility of the bus contracting model. I have high confidence that it will work, and sustain. I am convinced both Go-Ahead, and Tower Transit are having healthy profit on their biz, otherwise no point venturing oversea. Both are champions in their respective market.

I have doubt on a immediate "turn-around" in profitability for both incumbents, after a move from duopoly to free market, and from asset-heavy to asset-light model (excluding the one-time gain from asset-transfer).

I have also doubt on long-term (5-10 years) outlook of both incumbents, when the rail is also going thru the same transition.

(not vested in both)

[Art or Science]

SALE OF NEW BUSES AND NOVATION OF CONTRACTS TO LAND TRANSPORT AUTHORITY

http://infopub.sgx.com/FileOpen/SALE%20O...eID=383925

Not Vested

[Nick]

SALE  OF  NEW  BUSES  AND  NOVATION  OF  CONTRACTS  TO  LAND TRANSPORT AUTHORITY

http://infopub.sgx.com/FileOpen/SALE%20O...eID=383925

Not Vested

A small step towards the eventual adoption of the Gross Contracting Model in 2H 2016.

http://www.channelnewsasia.com/news/sing...84488.html

(Vested)

[CityFarmer]

SALE  OF  NEW  BUSES  AND  NOVATION  OF  CONTRACTS  TO  LAND TRANSPORT AUTHORITY

http://infopub.sgx.com/FileOpen/SALE%20O...eID=383925

Not Vested

The bus asset transfer has started for the company. The same will soon happen for SMRT.

(not vested)

[CityFarmer]

I posted a snippet of the article here, since it is more relevant for SBST.

I concur, the second structure is more likely i.e the progressive payment. The depreciation charges will be eliminated, but new leasing expense will be incurred by LTA. The leasing fee should not be lower than depreciation charges, IMO.

(not vested)

ComfortDelGro upgraded to ‘buy’ with $3.40 fair value by OCBC on improved visibility over bus reform
...
Chua believes there are two possible ways to do this. The first is straightforward, with LTA paying ComfortDelGro a lump sum of $800 million in cash to buy over CDG’s remaining bus assets at net book value.

The second is to structure it as a finance lease, where ComfortDelGro provides financing to LTA for the purchase of its bus assets, which will shift the $800 million worth of bus assets from ComfortDelGro’s balance sheet onto LTA’s books.

This means that LTA will make progressive instead of lump sum payment. "For the second method, we believe LTA is likely to spread payments over a five-year period to match the length of GCM contract tenure (FY16 to FY21)," says Chua.

As ComfortDelGro removes bus assets from its balance sheet, it will also need to record a corresponding amount in its receivables, which will decline with each LTA payment, until zero by the end of the fifth year.

Both methods will also eliminate the need for annual depreciation charges.
...
http://www2.theedgemarkets.com/sg/articl...bus-reform

[opmi]

^^ LTA no need cash flow management. Ah Gong 印钞票

[pianist]

The purchase was based on nets book value le..lta no need cash flow mgt still so ah niao

[corydorus]

Don't be greedy. Company share price already gains from asset transfer. Ah gong money belongs to all citizens who pay taxes. How can anyhow give. Everything has to go by the book.

[CY09]

As custodian of public money managing the transportation system, LTA has to ensure the payment is well deserved. Given that SBS's bus asset has a rather low profitability, being able to sell at book value is a fair deal.

SBS makes only about 12 Million from its bus segments which carries 1.094 Bil (1% ROA) or 270 Mil equity (5% ROE), assuming most of the allocated liabilities belong to bus segment

[pianist]

Net book is different from book value. Beri niao ah ha ha