SMRT has seen its profit dropped 31.2% in Q3 and issued warning that it will not see good results in the coming quarters. This is a big concern because the problem comes from higher cost of operation that is still rising. Recently, I received a brochure from SMRT on sleeper replacement works. To most laymen, we really do not care what is a sleeper as long as the train service is working fine. If you may excuse me, I think some of these expenses are unnecessary and I am quite sorry to say that I still do not know what is a sleeper after reading that brochure. Unlike a government organization, SMRT is a public listed company and hence it must ensure that cost of operation be controlled and unnecessary expenses be removed.
To be fair to SMRT, it has been trying its best to improve on its services and reduce train disruptions. However, this is coming at the expense of lower profit due to more frequenct maintenance and more train trips. The inflationary pressure from higher staff cost and the government control on the public transport fare hike have not helped it either. With less profit and therefore less money and less resources to spare, will it be able to continue to invest in more trains and improve on its operations?
As a public listed entity, one of its key missions is to earn a certain level of return for its shareholders. It has been able to do it quite well in the past years (about 4%). With escalating cost and inability to bring in more revenue, the sustainablity of its dividend payout policy is questionable. However, as highlighted in my previous blogs, this is one of the few companies that we can afford to fall into a deep sleep for many years and be confident that it will still be around when we wake up. Personally, I feel that the problem it is facing right now may be short term. If it is able to execute its plan well, it will be out of the woods sooner or later.
Being a small country, MRT lines have already become the backbone of our transport system. In a way, most of the people cannot live without MRT. And, frankly, I have no question of its long term survival.
