Brokers like transport sector for being resilient in a tough recession.
CIMB-GK MAINTAINED its “overweight” rating on the local transport sector, following the announcement of the Singapore Budget 2009.
Public transport operators Comfort Delgro and SMRT will be receiving a series of benefits from the recent Budget.
CIMB-GK maintained “outperform” calls on the two transport operators in a report yesterday, with a price target of S$1.97 for Comfort Delgro and S$2.08 for SMRT.
In a tough recession, people will seek affordable means of intra-city travel, so MRT ridership will rise, says the broker.
30% road tax rebate on buses. Photo by NextInsight
SMRT to benefit from rebates in road tax, diesel tax and property tax
Transport operators will be enjoying a 30% road tax rebate on goods vehicles, buses and taxis for one year with effect from 1 July 2009. This will save the sector some S$7 million.
Secondly, the special diesel tax imposed on taxis not hired out will be waived for a year. This will save the sector some S$6 million.
These measures will indirectly benefit taxi-hirers who have been facing flagging demand.
The Ministry of Transport will also work with the taxi operators and the taxi operator associations to have the savings passed on to taxi drivers, thereby possibly increasing fleet utilization rates.
SMRT, who has a total commercial space of over 26,000 sq m, will also benefit from the 40% property tax rebate for industrial and commercial properties for 2009.
Other general economic benefits
At a cost of S$4.5 billion, the Singapore government will pay 12% of the first $$2,500 of the monthly wage of each employee on the CPF payroll.
Corporate income tax will also be cut from 18% to 17% effective from year of assessment 2010, costing the government S$400 million to S$500 million a year over the medium term.
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DMG neutral on SMRT
Urban rapid transit remains SMRT's major earnings contributor. NextInsight photo
DMG maintained its neutral call on SMRT yesterday, with target price at S$1.65.
The national urban rapid transit operator reported last Friday that its 3Q09 net profit was S$41.2m, up 7.6% y-o-y, in line with DMG expectations.
MRT passenger fares remained SMRT’s major contributor to 3Q09 operating profits (S$8 million), as daily average ridership rose 8.4% yoy to 1.41 million rides.
Commercial space rental remained a star performer, with segment (rental) operating profits surging 36% yoy to S$10.8m. Total lettable space rose 6.7% yoy to 26,674 sqm.
Advertising operating profits rose 12.2% to S$4 million.
Operating profits from consultancy for engineering & other services more than doubled yoy to S$1.1 million.
Losses for LRT, bus and taxi operations
Electricity costs were higher during 3Q09 and LRT operations lost S$94,000.
SMRT’s bus operations posted a small operating loss of S$1.2 million due to increases in staff costs, repair & maintenance costs as well as higher diesel costs.
Taxi operations lost S$226,000 even as taxi rental revenue declined due to lower fleet utilization.
Related article: SMRT: Defensive play in land transport
