Categorized | Fundamental Analysis

Why SMRT Corp (S53-SIN)is still a good investment for the long term

Why SMRT Corp (S53-SIN)is still a good investment for the long term

SMRT has been in the limelight repeatedly this year for bad news in Singapore. Train breakdowns initialized in December 2011 happened thrice in a week and left ten of thousands of commutters stranded. Frustration among the public called for the public transport system to be nationalised. There was also widespread unhappiness about the rising cost of public transport. The saga also saw the resignation of CEO Saw Phaik Hwa.

Less than a year later when public confidence has been restored, a strike by SMRT bus drivers threatened the public transport company. SMRT share price falls to a low of 1.66 on 14 December. Many Analysts has also given the counter a “sell” rating but I believe that the counter is a worthly investment for the long term for the following reasons.

Guaranteed Revenue
There is no competition for its train services and a passenger have no choice if it wishes to reach his destination in time. Ridership levels has been stable and have bee rising throughout the years. Compared to 2007(1.53 million),ridership has increased by 50% in 2011. Comparatively, operating cost has only increased by 27%. Transport Minister Lui Tuck Yew has also expressed his willingness to raise train fares further in order to raise the wages of the drivers in the wake of the strike. This means a higher revenue for SMRT.

Replacement of infrastructure
The train delays trial has listed a number of railways improvement. Many observers has expressed a dismal showing in the company financial statements for the next few years but failed to see that out of the 900 million, a significant amount will be undertaken by the LTA using taxpayers money. Thus the actual impact on SMRT is not significant.

We do not expect to see a surge in the price of SMRT shares but if you are looking for a good dividend stock in the midst of unstable global outlook. SMRT is a sure winner.

2 Responses to “Why SMRT Corp (S53-SIN)is still a good investment for the long term”

  1. chiam says:

    whats the dividend pay out for this counter? annual or semi annual?

    • Admin says:

      It has been regularly distributing semi annually in July and November. Sometimes it might not declare dividend like in November 2010

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