Singapore’s LTA announced yesterday that ComfortDelGro’s (CDG) 75%-owned subsidiary, SBS Transit (SBST), has been awarded the Seletar Bus package, which is the third package that was put up for tender. The five-year contract’s estimated total fee is S$480.3m, and can be extended by another two years depending on performance.

SBST will progressively from 1Q18 operate 26 bus services, of which it is already currently operating 13.

Recall that the tender for this package was launched on 7 Jun 2016 and attracted nine bids when it closed on 27 Oct 2016, and SBST’s bid came in at the lowest. As the tender evaluation looked at both quality and price factors, with greater weightage given to the former, SBST was awarded as it had the highest combined total score.

Therefore, we expect this contract win to positively impact CDG from FY18 onwards, and reiterate BUY on CDG with an unchanged FV of S$2.95.

Source: OCBC Research - 20 Apr 2017