Monday, October 31, 2016


Public Transport Council (PTC) announced that it will lower Singapore's public transport fares by 4.2% from 30 Dec 2016 due to lower energy prices, limiting earnings upside for operators SMRT and SBS Transit (75% owned by ComfortDelGro).

A further 1.5% reduction will be staggered over to the next fare review exercise, likely to be held at end-2017 to early-2018. About 2.2m commuters will stand to benefit from the fare revision.

At the same time, PTC will be introducing a simplified fare structure based on distance travelled instead of distance of the fastest travel path. Additionally, fares for fully underground rail lines (Circle Line, North-East Line and Downtown Line) will be reduced to the same level as those above ground (North-South-East-West Lines), LRT and buses.

The fare reduction would translate to a $79m revenue impact for SMRT ($34.6m or 2.7% of 2015 revenue), SBS Transit ($8.9m, 0.9% of revenue) and LTA ($35.6m). As fares are being reduced, the public transport operators will be relieved from contributing to the Public Transport Fund this time round.

All in, market watchers estimate the fare cuts would shave 2.1% off ComfortDelGro's FY17e EPS to $0.16, implying a forward P/E of 16.4x.

The street has 10 Buy, 4 Hold and 1 Sell ratings and average TP of $3.11 for the transport group.

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