ComfortDelGro's Singapore buses suffer $4-5m losses

Is there any near-term solution?

According to Nomura, they had initially believed losses in the Singapore bus segment would shrink on the receipt of subsidies as we did see subsidies make a positive dent in 3QFY12 results, with losses shrinking to S$1.8mn.

But that shortly wore off across the next 2 quarters as stand-alone bus EBIT losses (reported in SBS Transit results) continue at a run rate of S$4-5mn.

Here's more from Nomura:

2QFY13F numbers should give us a clearer picture but for now, we have chosen to plan for the worst and hope for the best.

Hence, instead of a turnaround, we have now assumed that Singapore buses will continue to run sustained losses at the current run rate with limited improvement in the situation as cost pressures persist and subsidies are insufficient to help reduce the losses.

A fare increase, higher subsidies or a change in the bus financing framework to a costplus model could help alleviate the losses going forward.

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