Busted bus ops: ComfortDelGro's SBS Transit raking in $6-15m losses since 2011

It's a yearly suffering for ComfortDelGro.

In light of the Government's recent announcement that that it will implement a contracting model for the public bus industry, fears of ComfortDelGro losing grip on its 75% market share started surfacing. And the fact that its Singaporean bus business has been driving a whopping $6-15m losses each year since 2011 is not comforting at all.

According to OCBC, ComfortDelGro’s (CDG) core Singapore bus operations (operated via its 75%-owned subsidiary SBS Transit) has been a drag to its financial performance, raking in losses ranging from S$6-15m per year since FY11.

During its recent 1Q14 results, CDG once again reported an operational loss of S$4.7m for its local bus business (excluding advertising and rental income), although this was an improvement from the S$5.4m loss suffered in 1Q13.

Here's more from OCBC:

The main issue is the lack of a commensurate increase in fare adjustments (last increase came in 2011 prior to the recent 3.2% increase implemented on 6 Apr 2014) despite heightened operating requirements from a growing population.

Following LTA’s decision to implement a “Government gross cost contracting model”, we expect more significant improvements in its bus operations ahead, although the financial impact will only be felt in 2H16.

As one of the Government’s objectives is to inject more competition into the industry, CDG comes under risk of losing its market share (~75%) since ~20% of existing buses will be put up for competitive tender in 2H14 (implementation will only take place in 2H16).

Nevertheless, we believe CDG’s strong knowledge of the local operating environment and experience in operating a gross cost contracting model for its UK and Australia bus businesses will put it in a good stead to clinch the upcoming tenders.

CDG generated an operating margin of 8.4% and 19.2% for its UK and Australia bus businesses in FY13, respectively. LTA said that it has studied the London and Australian bus contracting models over the past two years, and hence we believe CDG will use these two countries as a benchmark, especially its UK operations, when it submits its tenders.

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia