SMRT

[iff]

Group revenue for the third quarter of FY11 (“3Q FY11”) increased by $19.1 million or 8.5% to $243.9 million due mainly to higher MRT ridership, contribution from Circle Line Stages 1 and 2, higher Bus ridership and higher rental and advertising revenue, partially offset by lower average fare for MRT and lower revenue from Palm Jumeirah Monorail.

Group operating profit was $2.9 million higher at $52.1 million in 3Q FY11 due mainly to higher revenue and absence of impairment of goodwill, partially offset by higher staff and related costs, energy costs, other operating expenses and lower other operating income. On account of higher operating profit, net profit after tax for 3Q FY11 was $43.0 million, 9.6% higher as compared to the same quarter a year ago.
For the first nine months of FY11 (“YTD FY11”), Group revenue rose 8.2% to $725.2 million. Net profit after tax for YTD FY11 decreased 9.4% to $127.0 million mainly attributed to lower operating profit.

(Vested)

[Thriftville]

Anyone has idea on how much SMRT can grow its rental business?

I see they've renovated some of the old stations, but the shopping area is rather small and doesn't really feel comfortable shopping there.

[Thriftville]

Hi buddies, i'm wondering if SMRT's growth will continue with increase in shop rentals? Currently, they've refurbished a few stations to collect rents.
Some are successful like Raffles Xchange, while some doesn't do well like Esplanade & Dhoby ghaut.

Please share your thoughts!

[Musicwhiz]

Hi buddies, i'm wondering if SMRT's growth will continue with increase in shop rentals? Currently, they've refurbished a few stations to collect rents.
Some are successful like Raffles Xchange, while some doesn't do well like Esplanade & Dhoby ghaut.

Please share your thoughts!

I would think the rental only makes up a small portion of their total revenues.

Even then, with so many tenants complaining about lack of business (at Esplanade Exchange, for instance), SMRT may not get a very stable and consistent source of cash flow either.

[kazukirai]

Hi buddies, i'm wondering if SMRT's growth will continue with increase in shop rentals? Currently, they've refurbished a few stations to collect rents.
Some are successful like Raffles Xchange, while some doesn't do well like Esplanade & Dhoby ghaut.

Please share your thoughts!

I think it would be better to look at monthly ridership like what Bangkok_kid in the CNA forum is doing.

After all, as MW has pointed out, rentals are a small part of SMRT's business and as you have also noticed...some locations are not doing very well. My personal opinion is that they need to take a leaf from Taiwan or Japan's book if they want to be better in this area.

Their taxi arm also isn't doing too well from what I hear. I haven't looked into the actual numbers.

And on top of that, they still need to install all those glass screen doors...Or will they be able to push the buck to LTA?

Having said that, which other business can cause inconvenience to their customers like SMRT has (that recent 45-50min delay for some 12,000 commuters comes to mind) and yet their customers will still come back faithfully the next day?

[Musicwhiz]

Monopolistic pricing power! If I am not happy with SMRT, I have no other choice but to take bus or taxi as they own the only rail network in Singapore.

Captive audience, but not necessarily happy audience.

[Ben]

SMRT rental revenue has been increasing at a much faster rate than fare revenue. In FY2010, rental revenue increased by $5million over 2009, due to increase in lettable space combined with better rental yield. Rental revenue rose 13% to $65million and EBIT from rental was up 9.4% to $50.8million. While rental revenue only makes up about 7% of total revenue, profit from rental is about 25% of total operating profit. It is obvious that rental business is highly profitable to SMRT.

Also, looking at the rental revenue and rental EBIT of $65million and $50.8million respectively, it is clear that SMRT need not have to spend a lot of money to substain this business. For every $1 of revenue, $0.78c goes to profit. Very good margin indeed. With the planned opening of new lines and stations, rental revenue is set to increase and rental EBIT is set to increae at an even faster speed.

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Monopolistic pricing power! If I am not happy with SMRT, I have no other choice but to take bus or taxi as they own the only rail network in Singapore.

Captive audience, but not necessarily happy audience.

Duopolistic should be more accurate, don't forget we still have ComfortDelgro. Even if you choose to take taxi or bus, there is a high chance that it is also operated by SMRT.

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And on top of that, they still need to install all those glass screen doors...Or will they be able to push the buck to LTA?

I understand that the cost is borne by LTA.

[kazukirai]

SMRT rental revenue has been increasing at a much faster rate than fare revenue. In FY2010, rental revenue increased by $5million over 2009, due to increase in lettable space combined with better rental yield. Rental revenue rose 13% to $65million and EBIT from rental was up 9.4% to $50.8million. While rental revenue only makes up about 7% of total revenue, profit from rental is about 25% of total operating profit. It is obvious that rental business is highly profitable to SMRT.

Also, looking at the rental revenue and rental EBIT of $65million and $50.8million respectively, it is clear that SMRT need not have to spend a lot of money to substain this business. For every $1 of revenue, $0.78c goes to profit. Very good margin indeed. With the planned opening of new lines and stations, rental revenue is set to increase and rental EBIT is set to increae at an even faster speed.

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Hi Ben,

Thanks for the inputs! As they say, if you don't look at the numbers, you'd never know

Do you think the rentals are sustainable?

I mean, given the observation that they've not done too well in Dhoby Ghaut Xchange and the other location, could the latest figures be due to paid up leases which they might have trouble sustaining later?

Other forummers, please feel free to share your views too.

[Ben]

Do you think the rentals are sustainable?

I do not know. Let's look at the last five years performance to search for some clue:

Rental Revenue/Rental EBIT/EBIT%:
FY2006: $25.9M/$21.0M/81%
FY2007: $34.5M/$25.2M/73%
FY2008: $42.0M/$30.9M/73%
FY2009: $57.5M/$46.5M/80%
FY2010: $65.0M/$50.8M/78%
FY2011 (up till 3Q): $54.7M/$42.5M/77%

Revenue and EBIT increase y-o-y for the past five years, even during the financial crisis period of 2008/2009. Current FY revenue and EBIT is almost certain to exceed last FY.

Based on these historical performance, I believe rental will continue to grow in the near future, but at a slower rate than before.

[Thriftville]

Ben, any chance for SMRT to expand retail on the spaces (grass land) beside the MRT stations?
For douby ghaut for example, there is quite a lot of space outside the MRT station.

For the tenants, currently i dont see many banks take up those space. except for bugis mrt (citibank) and woodlands (dbs atm). Would smrt be able to attract more established tenants like banks, ntuc fairprice, macdonalds, subway, etc.