OSK DMG has a target price of $1.60 (6% above current price) and a Neutral call. I’ll monitor price to see if it falls to below or near that level. And then evaluate it to see if worth buying for dividend yield. The CEO’s talk of getting rid of FT drivers’ supervisors, could if carried out herald a change of culture.
BTW broker has a Nneutral” call on the sector, with preference for ComfortDelGro (S$1.72 BUY TP S$1.85) for its cheaper valuations and overseas growth potential.
(Or “How to get more taxis on the road, increasing rentals, and still screw the consumer”)
Last Saturday, MediaCorp’s freesheet carried an article that screamed
More may obtain a taxi licence to rent cabs for personal use instead of plying the roads
It went on: more people could possibly be getting taxi licences for the wrong reasons – as suggested by Transport Minister Lui Tuck Yew in a press interview … Noting how, with the exception of those owned by ComfortDelGro, taxis are hired out mostly to cabbies who drive a single shift per day, Mr Lui said the authorities “need to be even more vigilant about this … because now driving a taxi can, with high COE prices, become a substitute for owning a car”.
Right, it’s the fault of cabbies gaming the system that we can’t get a cab. Not the fault of ComfortDelgro, the govt, or SMRT.
In mid April, there was a ST report that taxi drivers’ take-home income have gone up by as much as 30% since the increase in taxi fares at the end of last year. “ComfortDelGro, the biggest operator here with about 15,600 taxis, said average net income per cab per day has risen by 12 per cent to $210.93 … up from $188.69 in November, excludes costs drivers have to bear, such as rental and diesel.”
In the run-up to the fare increase late last year, our nation-building, constructive media were full of stories of the plight of cabbies. And when fares were increased, there were stories of drops in income as people stopped taking cabs. Poor cabbies. The media also reported extensively that the fleet owners were NOT increasing their taxi rentals. The benefits of the increase were all going to the cabbies.
So I was surprised (in February or early March) to read in the same said media that S’pore had plenty of taxis (about 27,000 of them) but that taxis were under-utilised because some work on one shift with one operator per taxi who “once they earn enough would call it a day”.
In April, we were told that they are doing well: to to 30% increase in take-home pay. So will there be shortages again as more of those taxis with one operator are AWOL because the operators call it a day after they earn enough? Now we are again reminded that many cabs are only operated by one person a day, and worse: that increasingly cabbies are gaming the system by using the taxi as a car, not as a cab. Juz earn enough to pay rental, then use taxi as car, for what we are not told. Transport gds? Visit clients? Or rent to senior members of Home Team or other scholars to have sex in in return for favours?
A shortage that will be solved when the fleet owners increase their charges so that the cabbies have to work longer hours again?
In other words, are we “being conditioned” for operating costs (not fares) for cabbies to go up to increase the supply of available taxis.
Then we will read stories in the media that taxi drivers are suffering, and that fares have to rise. And we shouldn’t complain if we are compassionate.
The cycle of spin goes on. Bit like the cycle of life.
Instead of inceasing rentals to increase supply, why not insist that each taxi must have mutiple operators working in shifts? Incentives, disincentives could be introduced to force cabbies into sharing? Afraid of too many cabs on the road, forcing down rentals because cabbies are leaving the industry?
.
Obviously it is not impressed with ComfortDelgro getting $733m or 67% of the $1.1bn package despite paying the state only 20% in dividends over the years*
Silchester International Investors LLP sold 21.49m shares in Comfortdelgro Corporation on March 30 at an estimated price of $1.56 each. This reduced its holdings by 15% to 123.893m shares (5.92%).
It had sold 42.62m shares from Nov 8 to Dec 12, 2011 at estimated prices of $1.425 to $1.44 each and 63.37 million shares from October 2009 to February 2011 at estimated prices of $1.62 to $1.54 each. Overall, the fund manager’s stake is down by 127.48m shares or 51% since October 2009.
Note the 13% rise in the share price since the second half of December 2011 from $1.385.
——
*The S’pore Labour Foundation (a statutory board affiliated to the NTUC which has 12%) has received dividends of roughly $150.46m from FY2003 to FY2010 (Comfort and Delgro merged in 2003, and SLF had a stake in Comfort.
Many bloggers are upset that the govmin is giving S$1.1bn to SMRT and ComfortDelgro to help improve bus services. Seems to them, “subsidy” is a dirty word. Hmm, didn’t they get the idea that subsidies are always bad from the PAP idea, particularly one LKY?
But maybe, the PAP has changed its mind that the word “subsidy” is a dirty word. Reminds me of what Keynes is supposed to have said In response to an accusation of inconsistency: Keynes is often reported to have said “When the facts change, I change my mind — what do you do, sir?”. More to the point, he is reputed to have said: “When circumstances change I change my mind. What do you do?”
Well the facts and circumstances have changed. The PAP’s share of the popular vote is only 60% and its perceived presedential candudate won by just 7000 votes or less than 1%.
I’m not complaining that the PAP is being pragmatic by addressing the hot issue of overcrowded public transport: I take the bus. I’m not one of those who don’t take the bus regularly, has one car per family member, doesn’t pay income tax, and bitches abt this subsidy.
BTW, I don’t own shares in either company, nor in SBS Transit. I never bot as I tot dividends might not be sustainable. Juz look at the share prices in recent years. The yield remains highish because share prices have collapsed i.e. dividend payments have fallen.
But now the 2011 dividend payments for ComfortDelgro and SBS Transist look sustainable.
Anyway, here’s an example of a subsidy. I own shares in HSBC which I’m glad took advantage of the European crisis to get a subsidy from the European Central Bank. Let the BBC’s Robert Preston tell the story,
“HSBC, widely perceived to be the strongest of the UK’s banks and one of the strongest in the world, borrowed €5.6bn from the ECB … The reason it may be controversial that British banks have borrowed so much from the ECB – a bit less than 4% of all the money on offer – is that the interest rate is so low, just 1%. So arguably eurozone taxpayers are subsidising UK financial institutions.
PM did the right thing by us S’poreans who use public transport* by appointing a judge that regularly commutes by train as the chairman of the Commitee of Inquiry that willl look into recent train breakdowns. But is this appoitment open to challenge by SMRT?
If SMRT were keen on shareholder value it should ask the judge tasked to lead the Commitee of Inquiry, Chief District Judge of the Subordinate Courts, Mr Tan Siong Thye, to step down because he was reported by ST as saying:
“As a daily user of the MRT myself, to and from work for more than 10 years, I share the concerns of many who want to know what went wrong and how to restore confidence in our MRT system.”
He said the breakdowns on Dec 15 and 17 were “quite unprecedented”, adding that “they caused significant disruption and inconvenience to hundreds of thousands of commuters”.
“Such incidents can also potentially pose a public-safety issue if they are not well managed.”
SMRT’s lawyers could cite the legal principle, “Justice must not only be done, but seen to be done”. They could point out that if the judge has been commuting for over 10 yrs (What no can afford car or cab to work meh?), he would have personally experienced the increase in overcrowding and congestation over the years, and that this would prejudice him against SMRT.
(I was an occasional train user but I tried avoiding the trains for the last few yrs because of the congestion in off-peak hours. Only since the May GE, have I resumed using SMRT trains during the off-peak periods given the government’s assurances that the trains are less crowded. But it’s all relative. My 88-year mum recently tried taking the SMRT on Saturday mornings around 7.00am. She has returned to taking the bus because she can’t always get a seat even at this time on the train. The bus is almost empty at 7.00 am. If anyone is wondering, she can afford a cab.)
But if SMRT’s lawyers make such a challenge, we could have riots if S’poreans decide to show SMRT and its controlling shareholder, Temasek, what they think of SMRT.
Looks like SMRT is the stock from hell for the time being, just like Quan Yifeng is the “artiste” from Hell. Buy ComfortDelgro or SBS instead?
—
*shumething can be right and popular, PAP. Juz because shumething is unpopular, diesn’t mean it’s right, PAP.
Depends on what you mean by “us”.
Usually when I have to go to and from Raffles City or Place, or Shenton Way, I take the bus, as it is the most convenient means of transport (driving included).
On Tuesday at about 4.20pm, I was at Outram and decided to take the train to Eunos and then switch to a bus to return home. When I boarded the train, it was full. I was very fortunate to get a seat as I had a heavy load (I had juz bot six books). When it got to Raffles Place, more people entered than departed. But the number entering was light (The slaves don’t leave until 5.30pm at the earliest). But at Raffles City, the train became very packed as masses got in, and not so many left. The train got less crowded at Bugis. But until Eunos it was full (but not packed), standing room only, as more people got off than in And this was at 4.20- 4.40pm!
Now at 4.20 - 4.40pm if I were at Raffles Place or City, I would have no problem getting a seat on the bus. The bus would only be at best three-quarters full of sitting passengers.
Draw your own conclusions.
As an investor, I can draw the conclusion that Comfort Delgro is not extracting full value from commuters. This could affect shareholder value? Management should learn from SMRT. Maybe bring in SVP ”Better you die than my train or bus gets damaged” Goh Kong Chee from SMRT*
*OK, OK. I exaggerate a little, but not that much
http://atans1.wordpress.com/2011/12/18/smrt-svp-is-great-believer-in-shareholder-value/
http://atans1.wordpress.com/2011/12/17/smrt-another-commuters-can-choose-comment/
There is a story going around that ComfortDelgro’s management sent an e-mail to SMRT’s management saying, “Thanks for the income opportunity. Christmas came early for us. Merry Christmas and a Happy New Year. Keep on doing what you are doing. Our mgt and shareholders love it.”
Seriously, I hear that analysts are tweaking their numbers for ComfortDelgro upwards to take account of a temporary switch from trains to bus, while commuters await further developments at SMRT.
As reported earlier analysts are lowering lower revenue forecasts for SMRT to take account of the coming fines, severance packages for senior managers, and higher maintenace costs. Compared to other metro train systems, SMRT has lower maintance costs as a % of revenue. But don’t start ranting like Goh Meng Seng. Our MRT system is a baby by int’l standards. London and NY have lines going back to the late 19th century. HK’s system is older. Only Shanghai, among major int’l cities, has a system that is younger than ours.
(To see where SMRT’s incremental profits come from see slides 9, 29, 30. They come from rents and ads not from fares. Fare growth is “peanuts” see slide 8 http://www.smrt.com.sg/investors/documents/presentations/DB_Conference_Investor_presentation_1QFY12.pdf )
SMRT shares fell 3.6% on Monday, and 1.1% on Tuesday the lowest in three months, following the three breakdowns last week. Looks like the head of communications attempt to show how he and SMRT valued shareholder failed. SVP Goh Chee Kong (retired SAF colonel and MINDEF spokesman) told us publicly that that it is better for commuters to die rather than damage SMRT property if emergency systems fail to work. (OK, OK. I exaggerate a little, but not that much
http://atans1.wordpress.com/2011/12/18/smrt-svp-is-great-believer-in-shareholder-value/
http://atans1.wordpress.com/2011/12/17/smrt-another-commuters-can-choose-comment/)
Failed twice. He can’t prevent SMRT share price from failing, despite showing us publicly that he is a failure, morally and ethically. Hmm, wonder if his parents, wife and children still respect him?
No-one believes Delgro’s and the National Taxi Association’s claims that the taxi fare increases are meant to help taxi drivers. Stockbrokers are already factoring into their forecasts, the assumption that sometime soon, Delgro will increase the rentals it charges taxi drivers.
So it wasn’t that surprising that yesterday, the constructive, nation-building ST carried a big headlined article on the front of its “Home” section on how “peanutty” were the earnings of the average taxi driver. Of course, it wasn’t written that way. The headline and story were about how an enterprising taxi driver can take home S$3,000 a month. The sub- text was, however, two-fold:
– S$3,000 wasn’t that much, taking into account the long hours, worked; and
– most tax- drivers took home S$1,500. “Peanuts” by any reasonable standard. But then how come taxi drivers “cheery pick” their customers? They can’t be that poorly paid? Read this on how they “cheery pick” customers by gaming the system.
The message at this time of the year, when charities round the world, resort to emotional blackmail to part consumers from their cash, is, “Spare the taxi drivers some money, don’t complain”.
This is a variant of the government’s much vaunted tripartitism at work. Usually the parties are the government, the employers and the NTUC. Here the parties are Delgro, SPH and the taxi drivers out to con the public.
No wonder SPH, and Delgro are good dividend-paying stocks.
Update on 12 December 2011 at 9.55am
Notice how the ST and other local media are playing down the drop in the number of people taking taxis? The cabbies they are quoting are talking rubbish. They notice the drop, blame it on the fare rises, but then say its the school hols. Sigh.
Amid all the rubbish and abuse thrown at them, let’s remember that the CEO and his PR team are not like those of SMRT. I hear the lady in charge of public communications, an ex-ST biz editor (must be a rare breed) is one smart lady who likes Victoria’s Secrets underwear.
Taxi users have not been told, “You have a choice. Don’t like our fare hikes, talk a walk, train or bus, or buy a car.”
Instead of complaining so much, if you use taxis and buses a lot, think of buying Delgro shares to hedge against taxi and bus fare rises. Management in Delgro are smarter than the average SMRT managers.
Update at 10am 8th December 2011
Wonder if analysts will be building into their models, the assumption that SMRT chief executive Saw Phaik Hwa will continue making stupid remarks that upset commuters, thereby making it harder for SMRT (and Delgro) to get their desired fare rises? Will they also make the assumption that such gaffes reflect her inability to manage a public transport company?
In a recent ST report, the SMRT CEO commented that the MRT system is “still reliable compared with other systems” and “I don’t see anything significant” in the number of disruptions and delays.
She attributed the train breakdowns to higher service frequency, new trains that “need to break in”, and more rainy days in Singapore. She cites the newly installed platform screen doors at surface stations, which need to synchronise with train doors, as another factor in train disruptions.
Maybe by M’sian Chinese standards (she refuses to become a citizen, preferring to be a PR), comparisons with third world cities and even NY, London and Tokyo are in order. But she should not forget that she is the CEO of a transport company in a city that has aspirations to be a leading edge global city. If our ministers can set the global bench-mark paywise, SIA for premier service or or our local banks for solid balance sheets, why can’t she set the global city benchmark disruption-wise when it comes to MRT systems?
Her other verbal gaffes: The SMRT chief had annoyed commuters last year when
– the issue of overcrowding was raised, “People can board the train, it is whether they choose to”; and
– she told commuters that they had a role in ensuring that trains were properly secured when there was a break-in at a train depot. She want us to volunteer to guard her train carriages.
“Our interest is not to help the transport companies make big profits. There is no reason for us to do that,” so said the PM on Saturday.
Correct if the cabinet is wearing its politicial hat. SMRT and Comfort Delgro making big profits by gorging commuters lose the PAP votes. Ask Raymond Lim.
But if the cabinet is wearing its shareholder hat, then it is in the interest of the government to allow these companies to squueze the last cent from the commuting public.
SMRT is a TLC, Temasek owning 54%. ”Temasek is an active value-oriented investor … to create and maximise shareholder value,” says its charter.
The S’pore Labour Foundation, a statutory board linked to the NTUC, holds 12% of Comfort Delgro. SLF is Delgro’s single largest shareholder. We all know how stat boards and NTUC affiliates try to maximise their profits.
Whether the PM and his cabinet want the companies to make big profits or not, depends on which hat they are wearing.
With the government worried that many S’poreans are itching to use the presidential elections to send another signal to the PAP that they remain unhappy with PAP policies (remember DPM’s Teo yellow card abt the difference between electing an MP and a president), the timing of the request for a fare rise by the two tpt cos is strange for two reasons.
Both companies have strong links to the government. SMRT is a TLC, Temasek owning 54%. The S’pore Labour Foundation, a statutory board linked to the NTUC, holds 12% of Comfort Delgro. SLF is Delgro’s single largest shareholder. They shouldn’t be in the business of making people angry with the government when there is an election coming.
Then there is the fact that they had been told that the issue of a price rise would only be addressed at the end of the year, after all the elections. The PTC, in February, and transport minister Lui Tuck Yew, in June, said that any consideration of fare increases should be done in relation with the opening of the Circle Line’s final two stages in October. This would have meant that this “hot” issue would not have been a major talking point during both elections.
Following the request for a price hike, the “talk cock, sing song” brigade aka the “lunatic fringe”, and responsible bloggers are all over the issue. As the new media space is Injun, Taliban, outlaw and bandit territory all rolled into one, S’poreans are reminded that we (I too take the bus and train) that we, commuters, are always being screwed for the benefit of mgt and shareholders. Come the presidential election, at least 40% will not vote for Tony Tan.
So why did the two companies request the rise at this time, when they had been told that October was the earliest date when increases would be considered?
Four explanations. All this action is Wayang. PAP MPs would protest, and the PTC would reject the request before the election. The govmin will tell us it is listening to us, the commuters, and thus make us more amendable to voting for Tony Tan. The new media pundits (rational and looney) would look stupid.
Or the PAP wants to show that it can still shove a finger into the eye of the ordinary S’porean and still win his vote? Given the GE results, this is a most unlikely explanation unless the PAP leaders are daft.
Or another mess-up by the tpt cos? Incompetent mgt accidentally saboing the government? SMRT has form in this area; from unguarded depots to scolding commuters for its mistakes to a perceived uncaring attitude towards a badly injured Thai girl.
Or maybe mgt of these companies are anti Tony Tan and the government? They want to fix Tony Tan and the government? Maybe that dynamic duo of Goh Meng Seng and Tan Kin Lian have friends in high places, and are smarter than we think.
