SINGAPORE: The Public Transport Council announced last week that public transport fares will be reduced by 4.2% starting next year, with the conclusion of its 2016 Fare Review Exercise. A further 1.5% reduction will be carried over to the next Fare Review.
The reduction follows on from last year’s 1.9% cut, DBS Group Research said noting that this could have led to weakness on ComfortDelGro’s (CD) share price given its exposure in the Singapore public transport space.
“In addition, the PTC has also simplified the fare structure by lowering the fares for fully-underground lines to the same level as above-ground rail lines,” the brokerage firm noted.
DBS stated that the estimated impact on revenue from the announced fare reduction on the Public Transport Operators will be about $79m a year, $8.9m of which will be shouldered by ComfortDelGro’s subsidiary, SBS Transit.
“The split of the impact on Bus (LTA), SBS Transit (Rail) and SMRT Rail will be about S$35.6m, S$8.9m and S$34.6m, respectively,” the firm cited.
However, this impact would be minimal, as the fare revenue risk for buses has been transferred to the Land Transport Authority with the transition of the bus operations into the Government Bus Contracting Model beginning last September.
“Hence, the impact on CD is only limited to its rail operations. The impact is relatively muted on CD as rail accounts for only about 6% and less than 1% of its revenue and operating profits,” DBS stressed.
