So finally, the news is out. LTA will be buying the assets of SMRT for a total sum of about $1b. With a debt position of more than $821m, I would believe that most of this money will go to paying the debts that were raised several years ago (Click here for the debt and cash position of SMRT). Perhaps, they will also allocate some of this fund for operating expense. In a nutshell, SMRT will become a MRT service provider, but the ownership of the trains will be LTA. Going forward, getting into such asset-light regime will help in the cash flow of SMRT.
Will LTA do the same for SBS Transit? To be fair and equitable, hopefully yes. This, in turn, will benefit Comfort Delgro which owns 75% of SBS Transport. For Comfort Delgro the debt and cash holding are $487.0m and $887.9m and is in net cash position compare to SMRT (Click here for the cash and net position of Comfort-Delgro). Hopefully, if LTA takes over to own the bus fleet, a special dividend could be on the card.
Disclaimer – The above view is the personal opinion of the author and does not constitute an advice to buy or sell the mentioned securities. The author shall not be held liable for any losses if reader(s) act to buy or sell the mentioned securities.
Note: Readers may wish to view to a free video clip “Debt and Cash position of SMRT and Comfort-Delgro” on bpwlc.usefedora.com. Registration is free.
Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.