Maintenance costs drag SMRT profits by 10% to $20.1m

More expenses are expected to come their way.

An increase in riders and average fares could not remedy the ever-increasing costs of repair and maintenance, causing SMRT's profit to disappoint.

SMRT admits rougher times ahead, as it braces for more bloated operating losses in the next 2 to 3 years as they try to renew their ageing rail system.

“1QFY16 taxi operating profit grew 32.2% YoY to S$5.5m on larger fleet while rental operating profit rose 5.3% to S$21.1m with contribution from Kallang Wave Mall (KWM), but rental operating margin declined 13.4 ppt to 64.2%,” a report from OCBC said.

Meanwhile, new projects by the company continue to inject hope for the coming years.

“We expect SMRT to benefit from the new bus government contracting model (GCM) and rail financing framework (RFF). We think SMRT’s bus operations will improve materially on better margin from 2QFY17 onwards under the new GCM. The expected absence of depreciation expenses should help as well,” the report added.