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SMRT Corp's rating (AAA/Stable/-; axAAA/-) is not affected by Temasek Holdings' proposed buyout offer, S&P Global Ratings said on Thursday.
"Our rating already incorporates a very strong link between the company and its majority owner, the government of Singapore, through Temasek, which is unlikely to change even if the company becomes a wholly owned subsidiary," said S&P in a release. "In our view, the proposed takeover demonstrates the high political importance the Singapore government gives to the provision of safe and reliable transportation and underlines the critical role of SMRT as a key provider of essential public transport services in the country."
The ratings agency said it expects SMRT to have stable profitability and to maintain a solid balance sheet, prompting it to leave SMRT's "aa-" stand-alone credit profile intact.
The New Rail Financing Framework is expected to reduce the capital expenditure in SMRT's business model and deliver more visibility in its margins.
S&P added: "The rating on SMRT already captures a degree of risk that the company may have to invest to meet higher reliability requirements and withstand higher competition from SMRT's lack of control over operating assets and the government's intention to promote contestability. A successful buyout by Temasek will allow the SMRT management to concentrate on operations and benefit from additional cost savings from delisting."
The rating could, however, come under pressure if SMRT focuses on non-regulated activities, overseas investments or if market competition is ramped up.