Special Situations, Content Strategist, Smartkarma

Crispin Francis

Special Situations, Content Strategist

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Event-Driven

LTA has just given written notice of its intention to exercise its rights under the BSEP Agreement.Essentially, LTA is buying 427 BSEP Buses from SBS Transit ("SBUS") at SGD164 mil.In this insight, we look at the implication it has for SBUS.

LTA has just given written notice of its intention to exercise its rights under the BSEP Agreement.Essentially, LTA is buying 427 BSEP Buses from SBS Transit ("SBUS") at SGD164 mil.In this insight, we look at the implication it has for SBUS.

On the 21st May 2014, the Land Transport Authority of Singapore (LTA) announced a transition to a <a href="http://www.lta.gov.sg/apps/news/page.aspx?c=2&amp;id=28fca09a-bed6-48f4-99d4-18eeb8c496bd" target="_blank">Government Contracting Model</a>&nbsp;For the Public Bus Industry.&nbsp;Investors&nbsp;seem to likes this new model, as the share price of SBS Transit ("SBUS") has risen&nbsp;by 26% since the announcement. &nbsp;Subsequently, on the 8th of May 2015, it was <a href="http://www.lta.gov.sg/apps/news/page.aspx?c=2&amp;id=6bc7cedf-2390-4c4f-904c-de12115b1354" target="_blank">reported</a>&nbsp;that the LTA's first bus service contract was won by a foreigner. This means that the market share of the current incumbents would be reduced. However, the share price of both SMRT and SBUS reacted positively to this news. &nbsp;We were intrigued by the latest developments, so we took a look at the current financial position of SBUS and ran some analysis to forecast how a new SBUS would look once the reforms kick post&nbsp;their Bus Service Operating License expiry in&nbsp;August 2016.&nbsp;As per our analysis, the numbers strongly suggests that SBUS is still undervalued.Furthermore, there is a privatization possibility by its parent SGX-listed ComfortDelGro ("CD"). Even if this does not materialize, SBUS is still likely to rerate and pay out a special dividend once the Government buys over their operating assets which currently have a carry value (at 31 Dec 2014) of S$952m vs its current implied EV of S$1,086m (ie market is not&nbsp;assigning&nbsp;any value to the continuing operations).&nbsp;&nbsp;We would go long SBUS in view of the potential re-rate and special dividend, with an added possibility of a privatization offer by CD.

On the 21st May 2014, the Land Transport Authority of Singapore (LTA) announced a transition to a Government Contracting Model&nbsp;For the Public Bus Industry.&nbsp;Investors&nbsp;seem to likes this new model, as the share price of SBS Transit ("SBUS") has risen&nbsp;by 26% since the announcement. &nbsp;Subsequently, on the 8th of May 2015, it was reported&nbsp;that the LTA's first bus service contract was won by a foreigner. This means that the market share of the current incumbents would be reduced. However, the share price of both SMRT and SBUS reacted positively to this news. &nbsp;We were intrigued by the latest developments, so we took a look at the current financial position of SBUS and ran some analysis to forecast how a new SBUS would look once the reforms kick post&nbsp;their Bus Service Operating License expiry in&nbsp;August 2016.&nbsp;As per our analysis, the numbers strongly suggests that SBUS is still undervalued.Furthermore, there is a privatization possibility by its parent SGX-listed ComfortDelGro ("CD"). Even if this does not materialize, SBUS is still likely to rerate and pay out a special dividend once the Government buys over their operating assets which currently have a carry value (at 31 Dec 2014) of S$952m vs its current implied EV of S$1,086m (ie market is not&nbsp;assigning&nbsp;any value to the continuing operations).&nbsp;&nbsp;We would go long SBUS in view of the potential re-rate and special dividend, with an added possibility of a privatization offer by CD.

Head of Digital Services at Singapore Post Ltd, Singapore Post Limited

Bernard Leong

Head of Digital Services at Singapore Post Ltd

Singapore Post Limited

Thematic (Sector/Industry)

How should digital leaders advise businesses? Two ways: target the high and low ends of the market while allowing cannibalisation against their current business model in a controlled pace.&nbsp;The trick lies in capital allocation and separation of the products/services moving towards both ends. Digital products often require high cost of acquisition contrary to perception by businesses that it is cheaper against traditional channels.

How should digital leaders advise businesses? Two ways: target the high and low ends of the market while allowing cannibalisation against their current business model in a controlled pace.&nbsp;The trick lies in capital allocation and separation of the products/services moving towards both ends. Digital products often require high cost of acquisition contrary to perception by businesses that it is cheaper against traditional channels.

Digital disruption bifurcates traditional market segmentation

Singapore

SBS Transit Limited provides public bus services, advertisement on its bus fleet, and bus chartering.

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SBS Transit Ltd (SBUS SP)

Gear 2, Bus purchases in progress

LTA has just given written notice of its intention to exercise its rights under the BSEP Agreement.Essentially, LTA is buying 427 BSEP Buses from...

Crispin Francis

Take the SBS Joy Ride

On the 21st May 2014, the Land Transport Authority of Singapore (LTA) announced a transition to a Government Contracting Model For the Public Bus...

Crispin Francis

Digital disruption bifurcates traditional market segmentation

How should digital leaders advise businesses? Two ways: target the high and low ends of the market while allowing cannibalisation against their...

Bernard Leong

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)