DTL2 to have impact on Q4 revenue: SMRT

DTL2 to have impact on Q4 revenue: SMRT

Listed rail operator SMRT Corp expects the revenue impact of the new Downtown Line 2 (DTL2) - operated by its rival SBS Transit - to be immediate.

At a post-results briefing yesterday, SMRT chief financial officer Manfred Seah said the new line, which opened a month ago, will erode its revenue by "$5 million to $6 million in the fourth quarter".

Primarily, the DTL2 will "decant" riders away from SMRT's North-South Line, the western part of its East-West Line, as well as bus services serving the Bukit Timah corridor.

Mr Seah said the impact will be 80 per cent on its MRT revenue and 20 per cent on its bus revenue.

Assuming third-quarter operating margins of 5.7 per cent and 5.5 per cent for the two businesses respectively, SMRT's operating profit for the two divisions could dip by a little over $300,000 in the fourth quarter, or $1.2 million over a full year.

Mr Seah said SMRT's taxi business is also feeling the impact of ride-hailing apps such as Uber and GrabTaxi.

He said that the hired-out rate of its taxi fleet dipped in the third quarter ended Dec 31 to 95 per cent, down from more than 97 per cent in the first half.

"There is no question that the entire (taxi) industry is facing pressure from these apps. The challenge will continue, as we compete for a limited pool of drivers," he said, adding that SMRT is "trying" to maintain its hired-out rate of 95 per cent.

Since Uber made its debut here in 2013, followed quickly by GrabTaxi and other app companies, Singapore's population of rental cars doubled to a record 29,369 last year. If half are rental cars used by the app companies to offer "limo" services, the fleet of "para-taxis" operating here is close to 15,000 - more than half the total fleet of regular taxis.

SMRT also added that retail rental - its top profit generator - has maxed out on available space at MRT stations. Its commercial managing director Dawn Low said that the company will now focus on improving yields for growth.

When asked if that meant raising rental rates, she said "yes". Ms Low, however, would not comment about the likelihood of that in the current economic environment.

Meanwhile, SMRT has "re-categorised" its operating expenses to reflect higher costs attributed to repair and maintenance (R&M).

This included moving the cost of technical and engineering staff and depreciation charges related to maintenance equipment over to R&M. With this, R&M makes up 31 per cent of operating expenses, versus 11.3 per cent otherwise.

Mr Seah said this was not a change in accounting convention per se, but was done so that the public would not "misunderstand that we are not doing enough" for maintenance.

christan@sph.com.sg


This article was first published on Jan 27, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.

More about

Purchase this article for republication.

BRANDINSIDER

SPONSORED

Most Read

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.