Land Transport

Deutsche had an upbeat report out on Singapore’s land transport industry last weekend in which it espouses its belief that the sector should maintain its positive run as 2016 is likely to see the implementation of the bus reform policy as well as greater regulations on disruptive private car applications.
Key catalysts in the coming quarters include comfortdelgro’s unwinding of unfavourable fuel hedges in 2015 while rail revenues could be bolstered by a 33% increase in rail capacity.
For SMRT however, the german bank sees rail reforms to occur only in 1Q19.
On the private car app front, the bank thinks that the app overhang on the sector is overdone as leasing rates for both CDG and SMRT have not declined since Uber started in early 2013. Stocks could thus rally when fears fade on more regulations.
Meanwhile the implementation of the government’s contracting model should affect the incumbents positively in 4Q16.
The bank keeps CDG on buy with TP of $3.88 and SMRT with TP of $2.32.