The projected FY16 expenditure of Ministry of Transport (MOT) would see a 9.3% decline compared with the revised FY15 expenditure to S$10.1b. Of this amount, 86.7% goes towards development expenditure, which is expected to decrease 15.3% due to completion of some airport works but offset by higher expenditure for rail projects such as the Thomson East-Coast Line (~S$2.8b).

Delving deeper, we note that the total project cost for “bus procurement for FY15 to FY18” is ~S$768.4m, with an estimated S$224.8m to be spent in FY16, and this amount likely pertains to LTA purchasing back the buses it funded through Bus Service Enhancement Programme (BSEP) since 2012.

However, there is still little detail and clarity over how the government may structure the purchase all of SMRT [HOLD; FV: S$1.51] and CDG [BUY; FV: S$3.40] bus assets. Therefore, we continue to maintain our NEUTRAL rating on the sector, although the absence of clarity seems to suggest progressive payment rather than lump sum payment.

Source: OCBC Research - 28 Mar 2016