Choo choo train: Singapore predicted to pounce on rail networks soon

Could the transport changes actually be a 2-part series?

The public bus industry's shift to a contracting model could likely be just the first of a 2-part initiative by the government to restructure and remodel Singapore's transport operations. Many are now speculating that the government will focus next on the revamping the rail financing framework.

According to OCBC, the Singapore Government’s initiative to move towards a gross cost contracting model is a positive paradigm shift which we believe will help to ensure the longer-term sustainability of Singapore’s public bus operations.

Although the financial impact will only take place in 2H16, we believe efforts to improve productivity (PTOs’ bus losses have narrowed) and changes to the fare adjustment system will aid the sector’s recovery in CY14 and CY15.

Here's more from OCBC:

Following the implementation of the “Government contracting model” for buses, we believe there are now stronger expectations for updates from the Government on the rail financing framework.

Assuming LTA does intend to own the rail infrastructure and operating assets (as was the case for Downtown Line), SMRT would stand to benefit more than ComfortDelGro as the latter does not carry any rail assets on its balance sheet.

Based on our estimates, the net book value of SMRT’s rail assets is worth ~S$1b. If the sale of these assets back to the Government does eventually materialise, it would strongly bolster SMRT’s balance sheet. We have not factored in this scenario in our model.

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