Tag Archives: SMRT

LTA to buy SMRT assets. How about Comfort-Delgro?

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.

Feeling uncomfortable about Comfort-Delgro

I remember I had informed students in the Facebook closed group in mid-2015 that Comfort-Delgro (CD) has probably plateau after pricing all the good news. Recently, I repeated once more on 13 April 2015 when the share price hit $2.91. On the very day, the STI moved up 75 points and following an announcement on additional requirements for rental cars, such as Uber and Grab-taxi. In the long run, rental car services can pose a direct threat to CD’s taxi business.


In retrospect, crossing $3.00 per share had been a great feat in view that it was an essential service stock. The share price was only around $1.50 per share 4 years ago. Up until 2015, it had been increasing year after year for 4 years running. Prior to that, the share price had been quite sluggish, for it was an ‘old-economy’ unexciting stock. The SMRT, on the other hand, seemed to be enjoying a greater fanfare as new lines were built. (However, that cannot be said of SMRT share price during that time.) Fundamentally, Comfort-Delgro is rock-solid compared to the SMRT. I like the stock very much. Just based purely on its cash hoard in 2014/2015, it could have paid out all its long- & short-term loans fully without incurring a cent of debt, making it a debt-free company, and yet maintaining a status of one of the largest (if not the largest) transport company by asset in the world. On the other hand, SMRT was struggling even to this very day to make profit out of its core business, ie rail operations. SMRT managed to keep itself in the black mainly because of advertising and rental businesses. These are not their core businesses.

As the business grew quarters after quarters due to its increasing presence overseas such as China, Australia and UK, so was the share price of CD. Along with this growth story were a spat of good news in the past 2-3 years such falling oil price and the land transport sector under-going complete overhaul into a asset-light regime. This has led many analysts to become more optimistic in their approach. Some even set their target price to as high as $3.46. By the mid-2015, there were at least three analysts with target prices above $3.40, and quite a number of them projected it to be at least $3.00 per share. In the best of my memory, I was not sure if any analyst offered a ‘sell’ call as the general outlook looked rosy. Perhaps, all these analyses were based on the assumption that the existing assets will be sold to the government, and the ‘windfall’ from the sale of the assets is to be returned to the shareholders in the form of special dividends.

Taking a leaf from the lesson learnt in OSIM’s case that too much good news that feed into ever-increasing share price can make a sad ending to even a fairy tale story, I decide that I should go against the tide to sell at least some shareholding of my CD stocks. Having doubled my investments over the years, I should have a more than 50% buffer, even if the stock price kept coming down gradually. In other words, I need not sell them hurriedly. After all, it is a fairly liquid stock and good news was still feeding into the share price. It was even touted to be the best performing stock at that time. I started scaling down my CD shares in mid-2015, each time taking advantage of its short-term high. By today, it is 11 months since I made the first sell of my CD shares.


In the meantime, the oil price continued to sink and it did not bottom until February of 2016. However this had already been reflected in the share price. Perhaps, the decreasing oil price had helped CD share price to bleep slightly above $3.00 per share. Meanwhile, the news of rental cars, like Uber and Grab-taxi, was probably beginning to bite even though the CD management seemed to brush it off initially. Taxi operation in Singapore is the most lucrative business for Comfort-Delgro, and if Comfort-Delgro were to lose its market-share, its bottom line is likely get hit. That probably explained why Comfort Delgro share price hardly crossed $3.00 per share in the last two months.

Given the additional threat, even the share price of companies that provide essential services can still come under pressure, albeit a bit slower compare to high-growth stocks. That said, Comfort-Delgro is still a great company in view of its deep pockets and the management’s ability to generate multiple sources of income. When the time is right, and of course when the price is right, perhaps, it is time to take comfort again. I will not catch a falling knife for the moment.


  1. This article is not a recommendation or an advice to buy/sell the mentioned stocks. It is just a pure sharing with the readers of this blog.
  2. Note that the share price of the mentioned stock could change abruptly upwards or downwards especially with the asset-light arrangements with the transport authority. The author does not have any privy information of the company or its related matters other than those released by the company publicly.

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.


SMRT & Comfort Delgro : The Bulim Bus package

The Singapore Land Transport Authority (LTA) had just announced the bidders for the 1st bus transport package. SMRT appeared to be particularly aggressive bidding at an extremely low contract price of $93.7m distantly far below the next lowest bid, Comfort Delgro (CDG)’s $125.2m. This represents more than 25% off from that of Comfort Delgro. Except for SMRT, all the transport companies’ bid clustered between $125m and $154m.


The question, of course, is SMRT’s bid suicidal? CDG has been in the bus operations in Singapore for many years and has been also operating in Australia, UK and China. Even with the wealth of experience, the SBS transit, which is a subsidiary of Comfort Delgro, has been incurring losses for 4 years running. The Singapore operation could only be marginally positive with other services like advertising. With that experience, surely CDG would be more realistic in the bid, building in sufficient but not exorbitant margin with due consideration of tight labour and changing fuel prices. With all the experience and past data, CDG has never achieved 25% net profit margin.

With the extremely low bidding price of SMRT, it is likely cut deep into the profit margin (if there is any). Perhaps, SMRT had made assumptions that oil price continue to be low at the current price of around $50-$60 per barrel and there is no problem with staffing.  Furthermore, it has to be extremely efficient in its operation. Perhaps, SMRT is banking on the fact that bus assets would then be sold to the authority, and thus saving the huge depreciation cost that are to be incurred in the mobile assets. This would help to push up the operating margin. It is, however, too early to say how things pan out.  If SMRT were to win in the tender, it is certainly a cut-throat competition for the land transport industry.

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(Brennen Pak has been a share investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre. He is the author of the book Building Wealth Together Through Stocks.)

Comfort Delgro – local and overseas business segments

Comfort-Delgro (CDG) report a set of good results before the Chinese New Year. All the business segments contributed positively to the final results and have been quite broad-based.

The main revenue contributors were from the bus and taxi segments. The two segments contributed 80% of the total revenue. Unfortunately, the operating margins were relatively low at 8% and 11.8% respectively.

For the bus segment, given that the Singapore operations, which contributed about two-third of the total revenue was incurring losses. This means that overseas bus operations have been the main profit contributors for this segment. Hence, any weakness in the exchange rate of British pounds, Aussie dollars or Chinese yuan may affect CDG’s bus segment business going forward.

The taxi segment is a different story. Given that revenue from the local taxi segment takes up about 3/4 of the revenue from taxi segment ($961.2m against $1280b), it is very likely that the local taxi fleet is a major profit contributor to taxi segment.

Apart from the bus and taxi segments, the other segments are also doing well. However, their revenues are relatively low compare to the bus and taxi segments. The worst segment is the rail which contributed about only 3.9%. This also provides an indication that operational profit margin from the rail for SMRT may also be thereabout.



  1. Net cash position. (Cash of $825.8m against long-term and short-term debt of $493.7m & $243.4m respectively.)
  2. Many sources of revenue and profit contributors.
  3. Assets transfer to government should be able to unlock more cash to enable Comfort-Delgro to invest in overseas (Total amount is about $1.1 to $1.2b).
  4. Low energy cost. Fuel and electricity takes up about 9.1% of the total operating cost. Last year, it spent about $329.8m against the total operating cost of $3609.2m.
  5. Generally easier to duplicate its bus operation system to other countries compare to rail operations.


  1. PE is about 22, a bit too rich.
  2. Any weakness in the British pounds or Aussie dollars or Chinese Yuan could affect its profitability.

(Brennen Pak has been a stock investor for more than 25 years. He has accumulated a wealth of experience in shares investment. He is the chief trainer of BP Wealth Learning Centre LLP.)

I never imagined 1,000 Spore Bus share could have turned to $50,000.

This information may be a little belated, but I think it is worth a mention following the financial results announcement of the Comfort Delgro for FY 2014.

In September 2014, Mr Goh Eng Yeow, a senior correspondent with The Straits Times wrote the following on Sunday, 21 September 2014.

 “When I started working in 1986, I had the good fortune of buying 1,000 Singapore Bus Service shares, which cost $3,000 and gave me a concessionary monthly bus travel pass.

I kept the shares, which have multiplied through various issues and stock splits into 16,040 Comfort DelGro shares and 1,200 SBS Transit shares worth a total of $41,000. That gave me a total return of 1,260 per cent over a 28-year period.”

Like Mr Goh Eng Yeow, my first stock was the Singapore Bus. But I bought two years after him in 1988. I still managed to pay for the stock of around $3 per share (at $3.08 per share to be exact). The reason why there was not much change in the share price was that there had been a catastrophic event in October 1987, which had seen most of the markets plummeted more than 20% within one day on 19 October 1987 (or widely known as Black Monday). Perhaps, at that time when I purchased the stock, the share price was still recovering from its ‘shock’. I bought the share was not because I wanted to dabble in stocks for I know nothing about stocks at that time. Like him, what I merely wanted was to be able to purchase a monthly bus stamp to enable me unlimited travels on SBS buses, a habit that we were used to during our secondary school days. This ‘privilege’ to buy the monthly bus stamp was given to shareholders of Singapore Bus only.

That, however, was not that crux of the story. The main crux was, unlike Mr Goh who kept the share, I sold mine about 2 years later, thinking that the upside potential would be limited as the main mode of transport in future would be MRT instead of public buses. That would mean that our reliance on public buses would diminish with time. I managed to sell the shares at $6.64 per share. At that time, I thought I had made a right decision with more than 100% profit in my pocket. My regret came when I read the above news in September 2014 that the share after going through share swap, bonus issues and share splits would have become 16,040 Comfort Delgro shares and 1200 SBS Transit shares. With the last closing share price of Comfort Delgro and SBS Transit at $2.87 and $1.85 per share on 18th February, the total amount would have been $48,254.80. It would have been $50k when the share price of Comfort Delgro was at $3 per share. Should I have kept the Singapore Bus shares at that time, my annualised rate of return would have been around 11% consistently for the past 25 years. If I were to include the dividends that were distributed during these years, the returns would have been much more. It might be even that the dividends received during these few years could have fully recovered the share price that I had paid for.


Even though I am holding some Comfort Delgro shares, which I am sitting on a profit of about 100% in the last few years, I still think that I should have held that 1,000 Singapore Bus share as not many companies offer such returns over the years.

 Moral of the story:

  1. Invest with a long-term mind-set.
  2. A stock that looks hopeless in the short run may turn out to be a gem in the long run. The company with good management is the KEY! Like what I mentioned in my book “Building wealth together through stocks”, a good management can help bring up the value of the share even though the product may look ordinary.

(Brennen Pak has been a stock investor for 25 years. He is a chief trainer for BP Wealth Learning Centre LLP. He is the author of Building Wealth Together Through Stocks.)