Transport operators up on announced infrastructure investment
Singapore
TRANSPORT operators got a boost on Tuesday after the finance ministry announced plans for a major reinvestment in Singapore's infrastructure - including vast improvements in public transport - to meet Singapore's future economic and social needs.
ComfortDelGro surged 3.8 per cent to S$3.00, up 11 cents. Its peers, SBS Transit and SMRT, rose 1.4 per cent and 1.7 per cent to end at S$1.84 and S$1.755 respectively.
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam had on Monday said that Singapore's development expenditures have already increased from S$12 billion five years ago to about S$20 billion (4.8 per cent of GDP) in the coming fiscal year. "They will grow further by 50 per cent to about S$30 billion (6 per cent of GDP) by the end of this decade," he said.
Analysts see public transport operators benefiting from these investments over the next few years.
The fact that duty rates for premium and intermediate grade petrol were increased by S$0.20 per litre and S$0.15 per litre respectively with immediate effect was also seen as a good thing for public transport operators, as the government attempts to discourage car usage and reduce carbon emissions.
"Should the increase in duty rates have a significant impact by lowering car usage, then both transport operators SMRT and ComfortDelGro (which owns about 75 per cent of SBS Transit) will be positively impacted through an increase in ridership," OCBC Investment Research said in a Tuesday report.
Earlier this month, ComfortDelGro posted a 7.7 per cent increase in net earnings to S$283.5 million for the year ended Dec 31, 2014. It achieved a record revenue of S$4.05 billion, breaching the S$4 billion mark for the first time.
But according to OSK-DMG, ComfortDelGro's management has highlighted that the likely entry of new bus operators in Singapore, introduction of third-party taxi booking apps, and higher competition from overseas bus businesses and elevated manpower costs will continue to limit near-term earnings growth.
