SMRT Corp, Singapore’s biggest subway operator, posted a 23 percent decline in first-quarter profit as the company spent more on repairs and maintenance of aging systems and trains undergoing overhauls.
Net income fell to S$15.5 million (US$11.5 million) in the three-month period ending in June, from S$20.1 million a year earlier, SMRT said in a statement to the Singapore stock exchange yesterday. Revenue fell 2 percent to S$313.9 million.
The rail operator is in the middle of carrying out a transfer of rail assets to the city’s regulator and a buyout by Singapore state investment firm Temasek Holdings Pte.
Shareholders are to vote on Sept. 29 on the asset transfer plan after multiple service disruptions since late 2011 evoked public criticism in a country famous for its public infrastructure and subsequently decide whether to accept Temasek’s S$1.2 billion offer to take SMRT private.
“The proposed scheme will allow SMRT to better fulfill its role as a public transport operator without the pressure of short-term market expectations,” SMRT CEO Desmond Kuek (郭木財) said in the statement. “It also provides the opportunity for minority shareholders to monetize their holdings.”
The stock, which has climbed 10 percent this year, was unchanged yesterday at S$1.63.
Operating loss from the rail business was S$9.4 million in the three-month period, widening from a loss of S$5.3 million a year earlier.
SMRT’s taxi operations posted an operating profit of S$4.5 million, down by 18 percent, while profit from bus services fell 86 percent to S$200,000. Net gearing was 67 percent at the end of June, versus 64 percent a year ago, according to the statement.
The service disruptions dented the rail operator’s reputation and led the Singaporean government to tighten rules on maintenance and supervision.
Singaporean Minister for Transport Khaw Boon Wan (許文遠) in October last year appointed an engineering specialist to advise on transforming railway operations. As part of the revamp, rail operators were to focus on service instead of also having to build up, replace and operate assets, leading to the proposed asset transfers to the regulator.
SMRT operates three metro rail lines in Singapore, while SBS Transit Ltd runs two.
Singapore is building a sixth subway line, which is scheduled to start operations in 2019, as part of its plan to double the country’s rail links in the next decade.
The rail overhaul follows a similar revamp to the city-state’s public bus system in 2014. At the time, the government said that it would take ownership of bus infrastructure such as depots and vehicle operators would then bid for the right to run services.
Temasek currently owns 54 percent of SMRT. The investment firm, which last month reported the first drop in the value of its stakes in seven years, has trimmed exposure to traditional banks and also embarked on a record pace of divestitures as part of a portfolio overhaul.
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