Since the trains started breaking down towards the end of last yr, bloggers and posters (not I) have been attacking SMRT for putting profits before safety, and disregarding the engineers’ advice (though without having a clue abt the said advice). Yacoob’s exemplar for the new media, the constructive, nation-building media were deafening in their silence on this national issue. I was silent because I was trying to figure out if I shld go buy some SMRT shares.
Well, based on the comments by the chairman, Koh Yong Gua, reported by ST and ST’s headline on an inside page, the inhabitants of cowboy towns were correct. (Explain that Yacoob and DPM Teo.)
“SMRT to refocus on its engineers” read the headline. This implied that SMRT had lost its focus on engineers somewhere along the line, assuming it once had such a focus.
Mr Koh said that “SMRT will be repositioned an engineering company”, begging the question “What was its earlier positioning?”. Retailer, property developer, financial engineer, or cash cow for Temasek? Since SMRT was listed in 2000, Temasek has received $694.3m in dividends (I’ve including the dividend declared recently).
The promotion of Mr Khoo Hean Siang in March 2011 to COO was meant to show the importance of engineers, he said. The previous COO who was “removed” was not a technical person. Wonder what was he? Ex-SAF officer or financial man? With the CEO a retailer, it surprises me that until 2011, the COO was not a technical man. And that board meetings did not include a very senior engineer in attendance.
Actually, I think Mr Koh still hasn’t got it. SMRT is not an engineering company. It is a company whose main business is moving large numbers of people around S’pore safely, and in reasonable comfort (most of the time). By focusing on engineers and positioning SMRT as an engineering company, he could be laying the seeds for a serious problem somewhere along the track. Investors in the West have found that companies dominated by engineers tend to goldplate processes and systems. Siemens, Rolls-Royce, Westinghouse, Boeing, Airbus and even GE, had to be run by non-engineers before shareholders benefitted.
Commuters may say so what? So long as it is safer and doesn’t breakdown, power to the engineers. The problem is that goldplating is expensive, and eventually someone has to pay. This is likely to be the commuter (via fare increases) or his avatar or alter ego the taxpayer.
I was planning to buy into a rights issue when one is annced, as I expect. But given the positioning as an “engineering company” and its “refocus on its engineers”, I think I’ll give the stock a miss for the time being. But never ever bet against Temasek when it comes to a local company.