SG Transport

SG Transport: The govt will amend the Rapid Transit Systems (RTS) Act to implement a new rail financing framework and inject greater contestability in the industry. Changes include:
i) LTA will collect from operators a licence charge payable for the right to run and generate returns from the revenue service,
ii) shorter licence period of about 15 yrs - down from the current 30-40 yrs, iii) LTA will take over ownership of the operating assets and lease them to the operators...

We see the following implications:
i) Positive for construction companies that perform civil engineering works, as LTA will be able to undertake integrated and holistic long-term planning of the train network, and proceed with faster roll out of new stations and lines. Tip OKP, Lum Chang, and Hock Lian Seng (HLS) as beneficiaries. In particular, HLS has a number of contracts for the Downtown Line 3 project under its belt.
ii) Negative for SMRT, SBS Transit, which could see higher costs arising from the licence charges, and may end up competing more aggressively with each other for the operating rights. A silver lining is that tenders are currently limited to the two incumbent operators, however competition could heat up in future should the govt open up the playing field to other parties in future.