Singapore’s transport sector pumped up for a profitable 2015

As fleet sizes grow and a new contracting model commences.

Singapore’s operators are in for a cheerful year, with both the near-term and long-term outlooks looking positive.

According to a report by OCBC, the sector outlook remains largely positive on several catalysts.

On near-term catalysts, analysts expect: 1) further growth for CDG’s taxi segment as it is the only taxi operator in Singapore allowed to grow its fleet size by 2.0% in CY15, 2) higher taxi rental income for both PTOs in CY15 as they continue to renew their taxi fleet, 3) full rental income contribution from SMRT’s Kallang Wave Mall from FY16 onwards, and lastly, 4) savings from lower energy costs that will be more visible from FY16 for both PTOs with different hedging exposures.

The longer-term catalysts are still the same from OCBC’s last sector report: 5) with a little more than a year before the new bus government contracting model (GCM) commences, LTA has to take over all the bus assets from the PTOs and analysts believe both PTOs have much to gain if LTA pays in lump sum to purchase the bus assets, 6) the transition to the new GCM by 2HCY16 will see core bus operations of both PTOs turn profitable, and 7) the announcement of concrete details on new rail financing model, that has limited impact on CDG but large positive impact on SMRT.

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