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yeah....but u forgotten.....my ah kong is the major shareholder....
Rosesyrup ( Date: 01-Nov-2013 09:58) Posted:
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Octavia ( Date: 01-Nov-2013 08:47) Posted:
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Higher staff and depreciation expenses, as well as repair and maintenance costs, put the brakes on SMRT Corp's net profit in the second quarter ended Sept 30, 2013, causing it to plunge 57.1 per cent to S$14.3 million, even as revenue rose 5.3 per cent to S$296.3 million.
Earnings per share for Q2 were 0.9 Singapore cent, down 56.8 per cent from 2.2 Singapore cents in the corresponding period a year ago.
An interim dividend of one cent per share has been declared.
For the first half, Singapore's main rail operator, which also runs buses and taxis, posted a net profit S$30.6 million, down 56.1 per cent from the same period last year.
Friend, you should really read before you post something with such confidence.
True, SMRT motto is to moving people. Enhancing lives. But since when did they not follow their motto? If you think the train service is squeezy, you can always go for the luxury cabs. SMRT offer more than just trains service. Since this is a stock forum, we are talking about running a business here, not some moral or political debates. A company should only provide service that customers are willing to pay for. Can't possibly ask for seats assigned to everyone, when all we wanted to pay is as low as $2. You want better service, can afford to pay, then go for cab.
And No! I am living in 2013, just in case you start to think SMRT train can travel through time. The 90% air and 10% ppl thing, I mentioned that it happens during non peak, not during peak! If you are still unconvinced, I can post a photo of the unused capacity inside the train during off-peak, in Dhoby Ghuat some more!
Rokawa ( Date: 15-Oct-2013 12:47) Posted:
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Reiterate short!
A " dividend" stock which is expected to pay below average dividend has not much value. If SMRT really cut back on dividend, many of the retirement funds sure remove SMRT from their portfolio!
Plus gov is planning to provide more free transport, a good sign that SMRT is not holding out well on its own.==> Nationalization is in sight!!!!
TP: 76cents
oldflyingfox ( Date: 02-Oct-2013 08:45) Posted:
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Reiterate My TP: 76cents. Shorting Encourage!!! I expect SMRT to report MUCH MUCH lower profit, cash and dividend this year. Reasons:
- Desmond 1 year anniversary as SMRT CEO is not a good news. Typically new CEOs tend to record alot of " extra expenses" in their first year so as to push negative responsibilties to the previous CEO while lowering the benchmark for themselves.*
- Desmond has been focusing on repairing and replacing. This eats into cash and dividends. With the recent expensive fine from government, SMRT would most probably choose to retain higher cash reserve to meet those obligations.
Shorting was previously discouraged as dividend remained respectable. Now that it is almost certain that SMRT has to pullback its dividend payout** and investors are leaving defensive counter for cyclical ones, I strongly encourage shorting on this one.
*Maybank $1 TP might have yet to take into account this point.
**I value SMRT with DDM
It is really just poor management.
Their inability to utilise their resources to maximise profits.
Fare increment is the easiest way to increase profits but there are definitely other workaround. Public transport fee hike entails too much political and social consequences.
Mardi.tan ( Date: 05-Sep-2013 21:58) Posted:
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PAP.. pls privatise smrt and return us the money. We will support u for coming election.
I agree wholeheartedly about the staffs during peak hr. Having staffs to usher doesnt help in efficieny because in rush hr period, everyone wants to get on the train so everyone will allocate themselves properly. They are really wasting so much money employing those staffs.
I feel that they have nt been utilising their space to maximise profits from advertising for other companies. Trains and station are perfect avenues for creative ads.
If no earning why still giving out increment and bonus? under management by Desmond SMRT is worst than before.
No strategy at all to curb the cost increasing.
Is better to ask government to make use of Termasek Profit to nationalize SMRT to subsidy the citizen.
I m not so agreeable on Rosesyrup's view. Firstly, I found that even during off peak hours, the trains are crowed most of the time, hardly can find any seats. I just wonder which lucky station she boarded from.
As for the staff cost, most of the increase is due to the gov new policy changes which required additional staff in certain areas. And I also felt that the previous CEO has been cutting corners during that time to push up the profit so now is only right to undo the wrong.
Looking at the business point, we should view SMRT as a property company and not a transport company. Don't forgot that all the retail shops it own are at the prime areas, it should not make profit from the trains but should instead view as function of pulling crows into the money generating retail shops. So to me, it is a huge monopoly landlord with prime spaces to let.
Not strong! I mean BIG! lol
Big not necessary strong.
WanSiTong ( Date: 02-Aug-2013 10:12) Posted:
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orangejuice01 ( Date: 02-Aug-2013 10:06) Posted:
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Hello Rosesyrup,
Great to hear someone like yourself who has the Visions and able to Chart the future for a " corporate enterprise" .
Ask those Directors sitting on the board why should not they done it decade ago....Would rather see people like you sit on the board than.....
Lost investment money and feel very sore every time when the blame games were pointing to mechanical, tracks, workers, inter-agency etc. except those that are charged with overseeing and directing the strategic vision and mission of the corp.
@ Rosesyrup
If SMRT has to implement your suggested solutions, a major revamp of operations is needed. This process gonna take quite a long time and is a painful one. But if for the long term, it would of course be good. The question is, will they do it and how will the public react to these drastic changes? Not vested.. Really nice and informative report/analysis btw..
Riding Along The North-South Line
Disclaimer:
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The following analysis is purely my personal opinion. I urge you to do your own assessment and calculation for any relevant decision making purposes.
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The analysis is based purely on consideration of the company's financial and economic interest.
Introduction
In this report, I will first describe SMRT's business model, identify the mistakes made by SMRT, improvements that can be made. Finally I will attempt to predict its possible price movement under 2 scenarios.
Business Model And General Strategy
SMRT's business model is much like telecom companies such as Singtel. These comapanies spent huge amount of upfront captial to lay the telephone lines (for Singtel) and train track (for SMRT), these expenses then become fixed cost and sunk cost. After setting up the basic infrastructure, these companies can make a profit so long as they provide their service at a price higher than the variable per customer. The difference between Singtel and SMRT models being that Singtel incur negligible varible for serving each additional customer, while SMRT incur a slight higher variable cost for each additional (group of) customers served. This is due to the expensive fuel cost. Nevertheless, I would like to emphasize that SMRT business model is definitely viable, this is especially true as the firm has near monopoly advanatage. The " inelastic demand" advantage is not mentioned here as SMRT is not free to raise its price to use this advantage.
The general stratgey for such business model would be to (1) cut variable cost and (2) increase revenue (refering to customer volume not fare price).
Going Down The Wrong Track (SMRT's Deadly Mistakes)
Instead of following the general strategy, SMRT decided to do just the exact opposite- (1) increase variable cost and (2) decrease utilisation of the train track.
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Increased Variable Cost
A huge increase in staff cost. These staffs are most probably those 3 types of SMRT staffs we see on board daily- some in green unifroms, some wearing a blue " security vest" , and others in full security unifrom carrying weapons. These staffs are basically there to guard aganist terror threat and ensure rules (no eat and drinking etc) are being enforced. As most these staff either have to be placed on board of every servicing train or have to check every train at the end of the line, they become a form of variable cost for each trip of train. Such cost cut into the contribution margin of SMRT and greatly magnified the volume/price it needed to breakeven.
Ever take a train on weekdays afternoon? The train is almost empty and you can choose which ever sit you want. However SMRT continue to run a standard 6 carriages train during such off peak period, carrying 10% human and 90% air. Enormous amount of wastage in fuel, wear and tear used to bear the weigh of empty carriages. This wastage may appear small on a single train trip, but the impact is magnify when SMRT run numerous train trip daily on different lines.
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Decreased Utilisation Of Train Track
Instead of making full use of the sunk cost invested in laying out the track, SMRT cannibalised its train revenue by offering more frequent bus service and add more new bus routes. As we all know buses are good substitute of train services. With more human traffic shifted to bus services, the train track are left idel. To make things worse, more fixed cost are incurred in purchasing new buses. Thus instead of trying to cover its old fixed cost, SMRT found its way to more new fix costs.
The Right Track (What SMRT Could Have Done)
- Decrease Variable Cost
- Control the staff cost:
- This can be done by doing sampling check on train rather than having a few staffs standing and ideling on each train.
- Other than those staff who carry weapons, staffs on board should wear plain civilian clothes rather than flashy green uniform. This is a stronger deterrence for the passengers with any unscrupulous motive since the passengers have no idea who are the staffs on board, where are they coming from and how many of them are on board. Thus it achieve a stronger effect with less people. In constrast, under the old system unscrupulous passengers are only deterred when a staff is in sight. Hence the old system need to increase the number of staffs as passengers increase, which is inefficient and expensive.
- Redesign the train:
- Invest in designing train carriages that can be detached and attached easily. This allows better response to traffic demand. E.g. Running a 2 carriages train instead of a standard 6 carriages train during non peak hours. This not only allow huge saving from fuel cost, and wear and tear but also improve the frequency of train service- one 6 carriages train converted into three 2 carriages train. Thus improved quality of customer service.
- Strategic Alliance (SA) For Alternative Fuel
- Although fuel cost take up a sizable percentage of the firm cost, I am surprised to see that the company has not taken any significant step to explore alternative fuel. Instead of maintianing the high annual dividend payout, hoping investors to remain confident in it, SMRT could have invest the cash in a SA with other transportation comapnies (e.g. SIA) to search for alternative fuel. This should give sizable profit in the long run. The management should be expected to be more proactive in taking up such initiative, this is especially true as SMRT management has little worry about competition.
- Increase Revenue
- Remaping Bus Routes (I am not sure about the feasibility of this, can someone shed some light on this one?)
- The train network is quite well developed in Singapore, granting access in all directions. How about using the train network as a backbone to travel between towns and limit bus services to intra-town only? Other than that, buses should only be travelling on routes where using the train does not make economic sense e.g. Pasiris to Punggol. If this idea is feasible, it would increase utilisation of the train network and improve its bottom line GREATLY- as the high fixed cost magnify the impact of higher revenue on profit.
Scenario 1: Riding Southward
This is the case where SMRT will keep its status quo and make no significant changes. In my own opinion, this is the likely case for the next 5 years. The current CEO who has taken leadership for about a year has not made much strategic changes other than making repair here and there. The management group also appeared to be at its wit end when it cried for a " More Sustainable Business Model" . Under this scenario, we can expect SMRT's profit to continue nosediving as the huge amount of wastage it is currently running would be further magnify as population continue to increase. Investors also have to mindful that SMRT is a defensive counter which tends to be overvalued during economic downturn and tends to be undervalued when economic is blooming. Under the assumption that economic will progressively recovered from June 2013 onwards, I have assigned a TP of 76cents to SMRT. That being said, investors should not expect to see SMRT share price free falling. This is because the high dividend payout continues to deter short-sellers. Thus the falling of SMRT share price will more likely to be a slow and painful death.
Scenario 2: Hope Of Riding Northward
This is the case where SMRT starts to implement major changes (such as those pointed out in the reccomendation) based upon the general strategy of reducing variable cost and increasing utilisation of its train services. However, the possibility of this happening is low and I do not expect this to be the case till there is a change in CEO. The current CEO continues to think that the problem lies within the tunnel and with its people. He probably wasn't aware that it is the high staff (variable) cost that is unsustainable not the business model, while frequent maintance and use of higher quality claws are highly affordable so long as the business remain profitable.
Anyway should this scenario happened, I would give SMRT a TP of 93cents. Nevertheless, this TP is still a long way from the current price. The huge discount reflects the high risk of making such a huge strategic changes- this is especially necessary for SMRT as its management has got little experience of initiating changes.
Just sharing my view here, email me rosesyrup123@yahoo.com if you have something to share with me. Thanks.
Author: Rosesyrup