SMRT’s new rail framework could be similar to Downtown Line: analyst

But finalisation of terms could not be anytime soon.

SMRT still has not divulged details regarding its new rail financing framework, despite having made some progress on the discussion.

Analysts at RHB Group say that SMRT is currently lacking near-term catalysts, and although it will continue to participate in the upcoming bus tenders, the outcomes would not impact its FY16 results as the bus operations under the revised contracting terms will only commence in FY17.

RHB adds that they do not expect finalisation of the terms anytime soon.

Meanwhile, OCBC says that with no details and timeline announced for the new rail framework for SMRT’s network, it can be safe to assume that it should be similar to Downtown Line rail framework.

This means: 1) asset-light model (i.e. LTA to purchase train assets with NBV of ~S$1b); 2) with most of SMRT’s depreciation expenses coming from train assets, the divestment of train assets means depreciation expenses to plunge after RFF is implemented; and 3) no capex obligation to buy new train assets to meet ridership growth under new framework.

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