20130502 SMRT wants more taxpayers’ money, transport fare hike imminent

SMRT wants more taxpayers’ money, transport fare hike on the horizon

SMRT Corporation has said its current business model is “unsustainable” and it is in talks with the government on “more sustainable models”.

“SMRT reports Q4 net loss of S$11.9m” http://www.channelnewsasia.com/news/business/singapore/smrt-reports-q4-net-loss-of-s-11-9m/659224.html

Since SMRT’s listing on 26 July 2000, out of 53 quarters, SMRT is making its first quarterly loss. It doesn’t make any sense for a well educated CEO to come to such a hasty conclusion that SMRT’s business model became “unsustainable” almost overnight because of one quarter of losses.

What can reasonably be expected from “talks with the government” – more taxpayers’ dollars/fare hike.

Coming on the heels of an expected more than $1,100,000,000 injection into PTOs by the government, it is shameful for the SMRT to even voice its intentions.
If every solution is about money, then any Ah Beng or Ah Seng is as suitable as ex Lieutenant General/SAF scholar/parachutee SMRT CEO Desmond Kuek to run SMRT Corporation.

A CEO analyses the underlying issues in depth and does not seek the easiest way out by immediately asking for handouts/assistance from the government.
In the case where the Singapore Government owns 54 per cent of SMRT, history suggests SMRT’s “talks with the government” will bear fruit.
But will there be an issue of moral hazard where the government bails out all the mistakes of it companies?

By turning to the government, CEO Kuek is effectively saying that he has run out of ideas to correct the mistakes of his predecessors. These mistakes must have been extremely serious to warrant assistance from the government. But then again, it could also just be the easiest way out because the government has a vested interest in the bottom line of SMRT Corporation.

Facts
– Listed at 61 cents, SMRT Corportation has paid its shareholders a total of about 79 cents to date – a 129 per cent returns over a period of 13 years. This by itself is more reflective of the returns of a private company and certainly not a public transport provider.

Shareholders have been handsomely rewarded during the last 13 yearsby any measures. If the share price appreciation were included, currently 80 cents above the issue price, this may be one of the best public transport investments in the galaxy.

(It largest shareholder, Temasek Holdings, initially owned 62 per cent of SMRT which was reduced to 54 per cent in FY 2006. Taking the lower figure of 54 per cent holdings = 824,000,000 shares X 79 cents = $651,000,000 was handed to Temasek Holdings)

The “unsustainable” model that CEO Kuek is talking about really raises serious questions about the financial yardstick he has in mind.

CEO Kuek is in the hot seat vacated by the previous profit seeking CEO who was paid $5000 per day for her epic screw ups.
As a commuter, it is reasonable to ask the CEO for a solution. Instead, the CEO asks for handouts from the government!

I would strongly suggest that if CEO Kuek is unable to take the heat, perhaps the military might be more suited for him. Perhaps he is too used to turning to the government.

Phillip Ang

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