• SBS ~20% of CD’s net profit
• SG taxi fleet down ~5% vs 6 mth ago
• Awaiting P2P transport sector framework

Price Action at SBS…

YTD, the share price of SBS Transit is up 55.9%, aided by earnings growth with the contributions from the Seletar and Bukit Merah Bus Packages which commenced operations from Mar 2018 and Nov 2018, respectively.

Management mentioned that the rail business will continue to face challenges from operating and maintenance costs despite the higher revenue expected from the 4.3% fare adjustment effective on 29 Dec 2018. In particular, repairs and maintenance costs are expected to rise with the NEL/SPLRT fleet in its mid-life cycle.

…and Net Profit Comparison

ComfortDelgro (CD) owns about 74.5% of SBS Transit, as at 27 Feb. As a comparison, SBS’s net profit was S$80m vs. CD’s S$303m in FY18, while SBS’s net profit was S$47m vs. CD’s S$302m in FY17. Breaking down CD’s revenue, we note that 59% was from Singapore in FY18, but this also comprises the taxi business and VICOM-related business, which are not under SBS. UK/Ireland accounted for 23%, Australia at 13% and China and others at 5%.

Awaiting Conclusions Post Consultation Paper on P2P Transport Sector

It is now almost two months from the closing date (21 Feb) of the government’s earlier consultation paper on changes to regulations for the point-to-point (P2P) transport sector. There are expectations that a new regulatory framework for the P2P transport sector will be established, given the current sheer size of the private hire sector. For instance, regulatory scrutiny of the private hire industry may be increased, levelling the playing field for taxi operators.

Based on LTA’s data, Singapore’s taxi fleet stood at 20,256 as at Feb 2019, down 10% from a year ago; CD’s share is about 60%. Recall that there was a slight increase in Singapore’s taxi fleet from Jun-Aug 2018, followed by a steady decline (Feb 2019 is down 5.2% vs. Aug 2018).

The number of private hire cars in Feb 2019 (67,788) is about the same compared to a year ago. Meanwhile, we fine-tune our estimates and with the improved market sentiment, our DCF-based fair value is raised to S$2.63 as we update our assumptions.

Source: OCBC Research - 16 Apr 2019