Transport

Transport: LTA has awarded the contract for the first bus package (Bulim) under the new government contracting model (GCM) to UK bus operator Tower Transit Group (Tower), on the highest combined total score for quality and price.

Tower's $125.6m bid (per year) is the third lowest out of eight shortlisted tenders, above SMRT's $93.7m and ComfortDelgro's $125.2m.

The 5-year contract comes with a potential 2 year extension (excluding adjustment for inflation, changes in wage level and fuel costs, service variation and incentive payment).

Tower will operate the new Bulim Bus Depot at Jurong West Avenue and 26 bus services from the Jurong East, Bukit Batok and Clementi bus interchanges from 2Q16.

Market watchers should welcome the news after four months from the close of the tender in Jan, which raised concerns over the future profitability of the new GCM given SMRT's aggressive bid, which should be put to rest on LTA's acceptance of the higher tender price.

Currently, SMRT and SBST operates 35% and 65% of the routes in the Bulim Bus package. Even though this would result in market share loss to the incumbents, Maybank-KE cited that they are not concerned as it is likely loss making anyway.

The house current have HOLD calls on SMRT (TP $1.57) and ComfortDelGro (TP $2.90).