The Public Transport Council (PTC) announced yesterday that it will implement the maximum allowable adjustment quantum of 4.3% for bus and train fares starting from 29 Dec. For adults using travel cards, this translates into an increase of S$0.06 per journey.

The PTC deems this necessary with a rebound in energy prices, higher wages and a greater “network capacity factor” which measures commuter demand and enhancements/growth in public transport capacity.

The rail operations of SBS Transit has been facing “significant cost pressures” since 2013 as a result of operating the Downtown Line, and the increase in annual revenue for SBS Transit Rail with the fare adjustment is estimated to be about S$10.9m. Bus fare revenues will increase by S$43.2m for all operators, which will go toward reducing bus operating subsidies.

To recap, ComfortDelgro’s revenue in FY17 was around S$4b and net profit S$300m. Prior to this we had a Hold rating on the stock, but with the recent share price drop following news of the impending entry of Go-Jek, we put our rating under review for now. 3Q18 results will be out on 9 Nov.

Source: OCBC Research - 31 Oct 2018