SMRT

[Temperament]

if SMRT drops to $1.00 I will load big big

if they pay like 2.5 cents dividends, 2.5% yield still decent while waiting for the recovery

Big Brother is always watching.

[CityFarmer]

Fare review report is out - details should be out next week.

Let's see what it brings.


*****************
SINGAPORE: The Ministry of Transport (MOT) has received the Fare Review Mechanism Committee (FRMC) report.

In a statement from MOT, Transport Minister Lui Tuck Yew thanked the FRMC Chairman Richard Magnus and committee members for the thoughtful and comprehensive report to review the adjustment mechanism and the concession schemes.

MOT will study the FRMC report in detail and will give a response next week.

The FRMC was appointed by the government last year to review the framework for public transport fare adjustments.

The committee was scheduled to present its recommendations early this year but the submission of its findings was delayed. The FRMC had said it needed time to gather quantitative feedback.

Yes, it is interesting to see the detail.

My speculation is the formula will not result on a immediate fare hike, but on a long term incremental model. In a cost-plus cum asset light model, the revenue burden will be on regulator, there is no need for immediate fare increment, IMO

[GPD]

For a cost-plus model, does it not implied a a ceiling with no floor if fares are already determined by cost*(1+mark-up) which may not then be easy to move in tandem with (increasing) cost without another review?

If SMRT lose control on cost, public has to born the additional cost in the next review and investors gets lower return during that period.

If SMRT can control cost and running the operation cost-efficiently, while it may means better return to investors, it makes it difficult to justify higher fares which then limits the upside to profit for investors in the future.

[CityFarmer]

For a cost-plus model, does it not implied a a ceiling with no floor if fares are already determined by cost*(1+mark-up) which may not then be easy to move in tandem with (increasing) cost without another review?

If SMRT lose control on cost, public has to born the additional cost in the next review and investors gets lower return during that period.

If SMRT can control cost and running the operation cost-efficiently, while it may means better return to investors, it makes it difficult to justify higher fares which then limits the upside to profit for investors in the future.

Interesting view, but it might not happen, IMO.

The contract value is determined by market competition, not by a close-door review of PTOs and LTA/MOT. In other words, if SMRT operation is very cost-efficient (and hopefully effective) relative to other PTOs, than it might not necessary resulted a lower contract value in the next bidding of license.

If SMRT does badly in its cost control, it will be out-bid by other PTOs. Commuters aren't necessary need to bear its inefficiency.

(not vested)

[Ben]

The contract value is determined by market competition, not by a close-door review of PTOs and LTA/MOT. In other words, if SMRT operation is very cost-efficient (and hopefully effective) relative to other PTOs, than it might not necessary resulted a lower contract value in the next bidding of license.

If SMRT does badly in its cost control, it will be out-bid by other PTOs. Commuters aren't necessary need to bear its inefficiency.

(not vested)

I agree with you. I think the two current PTOs are already operating at very cost-efficient level since they have been operating for so long. It would be very difficult for a third PTO to complete with them on the same scale. No forgetting that the current two PTOs have other cash cows (retail, advertising, rental) to sustain them, so even if they bid with the intention of just breaking even its bus operation, it would lift their overall profitability. Can another operator do that? End of day, my guess is that the two PTOs will still be the dominant players with probably one or two small players operating at a very much smaller scale.

Such a development can only be good news to SMRT and CDG.

[Temperament]

How about every citizen own a piece of SMRT ? Then runs SMRT as a community company but like a "private enterprise". Will it works? Or is it too communistic so it can not works? If it works, everyone should have equivalent dividends regardless of some rich citizens and many others who don't use the SMRT one reason or another. Naive? But we like to be the first to try in almost everything. Can try or not?
Of course not. There are just too many selfish, private reasons.

[Ben]

How about every citizen own a piece of SMRT ? Then runs SMRT as a community company but like a "private enterprise". Will it works? Or is it too communistic so it can not works? If it works, everyone should have equivalent dividends regardless of some rich citizens and many others who don't use the SMRT one reason or another. Naive? But we like to be the first to try in almost everything. Can try or not?
Of course not. There are just too many selfish, private reasons.

How to make every citizen own a piece of SMRT? Those who can not afford to pay will be given something FOC? And really, if this were to happen, I think it will be bad news for everyone, because by then, SMRT will not have to run efficiently, not even effectively. Just do the minimum, after all, govt will come to its rescue if they fail since everyone has a stake and govt cannot let it fail. My personal view only.

[specuvestor]

The biggest missing puzzle in this discussion is how to get VALUE... value is not the same as cheap as buddies here should know

How do we derive quality adjusted price between the different operators will require judgement. Everyone knows how to look at the bottomline. But that's knowing the price of everything but the value of none. Problem with MRT in the first place is that they compromised on maintenance to maintain the "price" (pun with stock market price intended as well)

[Ben]

The biggest missing puzzle in this discussion is how to get VALUE... value is not the same as cheap as buddies here should know

How do we derive quality adjusted price between the different operators will require judgement. Everyone knows how to look at the bottomline. But that's knowing the price of everything but the value of none. Problem with MRT in the first place is that they compromised on maintenance to maintain the "price" (pun with stock market price intended as well)

Interesting that you bought up this Value vs Price thing. Many people go to JB for shopping and compare prices between here and there. In generally, it is cheaper over there, but there are some goods while cheaper there, it has a different content or ingredients. So value is different.

I hope LTA don't make the same mistakes as before, ie, lowest price wins. Look at the main contractor for two stations (IIFC) on the new Downtown line who went bust recently. In one of the AGM I attended, while chatting with the CEO, he told me that he will not bid for LTA projects anymore, as the price is cheap. So much for Value vs Price.

[brattzz]

STE should try bidding for the "Engineering/Maintance " Portion of SMRT, they are strategtically aligned with Temasek and much better in engineering.
SMRT just focus on the operations & efficiency portion, manpower.