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SMRT's rail woes set to escalate further, analysts warn
Repair and maintenance costs will soar.
SMRT’s rail business is expected to struggle further in FY16, following its first-ever operating loss in the fourth quarter.
CIMB analysts Roy Chen and William Tng noted that SMRT will grapple with increased repair and maintenance (R&M) costs throughout the year.
SMRT’s manpower costs will also increase to meet tightened regulatory standards, while its expanded train fleet will suffer steeper depreciation costs.
“Management has guided for an increasingly challenging operating environment in the rail business due to tightened regulatory standards. The upward cost pressure is unlikely to be negated by the 1.9% effective fare hike effective April 2015 and savings in energy costs,” they noted.
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