The Public Transport Council (PTC) announced on Monday evening that the 2018 fare review exercise (FRE) has commenced, and that the maximum allowable fare adjustment quantum to be considered for 2018 FRE is 4.3%.

Public transport operators will need to submit their fare applications to the PTC by 1 Oct 2018 for consideration. While a fare hike is positive for operators, we do note that energy prices have been rising.

Energy prices in 2017, which will be factored in the fare formula this year, rebounded by 26.2% over the previous year. Though the PTC will announce its decision on the fare adjustment quantum in 4Q18, this latest piece of news is likely to lead to a positive knee-jerk reaction to land transport stocks such as ComfortDelgro [HOLD, FV: S$2.50] and SBS Transit [Unrated].

For ComfortDelgro, we would

1. monitor the local ride-hailing space for any potential new entrants,
2. operations of the Downtown Line and
3. the progress of its overseas acquisitions which is expected to be a key driver of growth.

Source: OCBC Research - 4 Sept 2018