Chitchat Delisting of SMRT - What does it mean?

By now Singaporeans received 3 sets of news within a month, all about the same public listed company SMRT - (1) defective trains on SMRT lines and their return to China, (2) LTA buying back SMRT infrastructure and rolling stock assets and finally (3) the proposed buy-back and delisting of SMRT from SGX.

Many assumed that it will be nationalisation or on the way to nationalisation as the it is effectively in Govt hands. Yes and no. Here are some interesting things

1) SMRT like its parent Temasek will be wrapped up ever so tightly from prying eyes. We will not know how much Desmond makes even or the bonus he gets even if SMRT continues to perform badly. There are no disclosure requirements to the public unlike their listing with SGX.
2) Gerald Giam and any analyst for that matter will no longer have access to financials such as ROE which the former showed in 2011 that SMRT was making profits hand over fist despite delivering sub-standard service
3) Unlike a Stat Board which has parliamentary oversight and by law must present its annual report and financials t parliament, a private company of the govt does not have to. Look at Temasek and Ho Ching. They have made repeated mistakes in large investments and she is not answerable to anyone but her husband. SMRT will have the exact same protection.
4) Lastly, it will easier to package SMRT with additional state resources and cash injections and sell to a company for a "substantial profit" that will make Temasek look good. The additional funding need not be disclosed.

Top most is $1 bln will b collected n diverted to mother company n disbursed on when it is needed after restructuring to remove such support team n subcontract out. There will n sufficient funds to sustain the repair n point fingerz to elsewhere when things go awry.

Superficially it removes the need to balance commercial performance vs serving a public need. However the drawback is, there will be no recourse from public for poor service delivery - not like there is a lot to begin with.

You are right.

SMRT has become a political liability to the PM and the PAP. As Khaw has no control over Ho Ching and Temasek he, his ministry and LTA will carry the burden of subsidising SMRT thru the public purse to improve performance if SMRT is delisted. Previously as a listed company he cannot provide it grants and buying of rolling stock was best that they can in terms of subsidising.

At the moment only the auditor general can scrutinise Temasek's books but the grants and transferring of assets at below value is something that is still grey. To date no audit of Temasek has been made public.

What is striking is that no one in the private sector has challenged the Govt on handling this matter. I do note that ST's Chris Tan said that he did not buy their story or reconcile it after attending the press conference. Chris Tan was famously banned from Delgro Comfort's press conference for challenging the remuneration of their CEO / MP.

red amoeba said:

Superficially it removes the need to balance commercial performance vs serving a public need. However the drawback is, there will be no recourse from public for poor service delivery - not like there is a lot to begin with.

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If they don't reveal their annual profits or loss then how can they justify any fare increases?

Fare reviews by the PTC now use macro economic factors such as consumer price index, energy index etc. No longer dependent on operator. The previous approach made famous by SBS was to show a significant drop in profits every fews years was thrown out. As you know any hugely profitable company can report a loss by pushing expected profits into expense line by embarking on a spending spree.

johnny333 said:

If they don't reveal their annual profits or loss then how can they justify any fare increases?

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scroobal said:

Fare reviews by the PTC now use macro economic factors such as consumer price index, energy index etc. No longer dependent on operator. The previous approach made famous by SBS was to show a significant drop in profits every fews years was thrown out. As you know any hugely profitable company can report a loss by pushing expected profits into expense line by embarking on a spending spree.

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By providing for bad & doubtful debts for the current financial year & transfer it back the next & declare a profit in the next financial year....& other ways of "cooking the books"...legally!:roll eyes:

Anyway..how can any of the transport companies here ever lose money?.....there are no external competitor except now...one foreign bus company running a limited route....& for years, we have been paying for fares increases,while the quality of services keep sliding & nearly went into a disaster...had not divine providence looked after the people...if not people would have died in the last major train breakdown....that shook them from their slumber & stupor!

Do we need more of these awakenings? the next will be a major one...to bring about a proper change?

means take buses and taxis!

it means no need to report to shareholders. which is a bad thing cos accountability will go down the drain.

You are right. They were not losing money but making substantial profits without carrying the required maintenance. Now that LTA is taking back the rolling stock and wants to control the maintenance regime and revenue stream they can no longer get away. Its means pumping more money just to meet the new propose performance hurdles.

halsey02 said:

Anyway..how can any of the transport companies here ever lose money?.....there are no external competitor except now...one foreign bus company running a limited route....& for years, we have been paying for fares increases,while the quality of services keep sliding & nearly went into a disaster...had not divine providence looked after the people...if not people would have died in the last major train breakdown....that shook them from their slumber & stupor!

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When it's listed everyone complains that SMRT should not be profit driven because it provides a public service.

Now that it's being delisted the complaints have shifted to lack of transparency from not being answerable to the public.

No wonder the PAP has made itself deaf to criticism or they would have gone deaf a long time ago from the constant moaning, whinging and whining from sinkie losers who are impossible to please.

johnny333 said:

If they don't reveal their annual profits or loss then how can they justify any fare increases?

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When have the pappies put their justification of any kind to a vote or referendum by sinkies? Some Western countries like Switzerland will put matters of national importance under referendum to obtain consensus of the people. When pappies decided to open flood gates to let foreigners swarm into sinkie land, it is only a piece of paper needed.

When DBS, SIA etc who are part of Temasek make record profits, no one made noise. The reason for that is that it was properly set up and structured by proven individuals - Hon Sui Sen, GKS and qualified professionals that can run the show. SMRT was doing fine and making profits until the leadership under Ho Ching appointed a duty free emporium expert to run an engineering outfit. It still did not learn its lesson and this time appointed an Army General.

Context is always important. SIA and DBS are not about to be delisted, are they? Can you imagine Mdm Saw running SIA or DBS? When they pushed a former Chef of Defence Force to SIA, the Board appointed him to support function - engineering and he never made it to No. 2 or No. 1. He left.

Leongsam said:

When it's listed everyone complains that SMRT should not be profit driven because it provides a public service.

Now that it's being delisted the complaints have shifted to lack of transparency from not being answerable to the public.

No wonder the PAP has made itself deaf to criticism or they would have gone deaf a long time ago from the constant moaning, whinging and whining from sinkie losers who are impossible to please.

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scroobal said:

When DBS, SIA etc who are part of Temasek make record profits, no one made noise. The reason for that is that it was properly set up and structured by proven individuals - Hon Sui Sen, GKS and qualified professionals that can run the show. SMRT was doing fine and making profits until the leadership under Ho Ching appointed a duty free emporium expert to run an engineering outfit. It still did not learn its lesson and this time appointed an Army General.

Context is always important. SIA and DBS are not about to be delisted, are they? Can you imagine Mdm Saw running SIA or DBS? When they pushed a former Chef of Defence Force to SIA, the Board appointed him to support function - engineering and he never made it to No. 2 or No. 1. He left.

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Stop your sensless drivel, its making me sick. the only reason that Temasek wants to delist SMRT is over money.

After LTA agreed to buy SMRT's fixed assets for $1 billion, it created a cash injection into the company. As well, and this is even more important, unburdened by having to maintain and replace these fixed assets sold to LTA, the company's expected Return on Equity was going to be high. Probably more then the 15% that it has been regularly earning. At this stage, Temasek decided to just delist it as it was expected that the share price would rise on these increased profits. Better to buy back the shares now while the price is lower then wait for the price to rise. If Temasek did not delist (buy all the shares on the open market it does not already own) and the share prices goes back up, Temasek owning 54% will benefit, but so will the 46% of the shareholders that are privately held. Stomacksick's mentality is why help 46% make money when we can buy them all out now, and we own 100% when the company becomes more valuable.

Temasek offered to buy out SMRT at $1.68 per share. The shares are now trading about $1.65 a piece. The deal is most likely to go through. Does this mean free money for those who buy now?

it will go down the path of micropolis and ansett

the b1tch will kill it

JohnTan said:

Temasek offered to buy out SMRT at $1.68 per share. The shares are now trading about $1.65 a piece. The deal is most likely to go through. Does this mean free money for those who buy now?

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it was at 1.51 before the buyout,whatever profit margin is gone.

frenchbriefs said:

it was at 1.51 before the buyout,whatever profit margin is gone.

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It looks like there's still a profit of 3 cents a share. It could be more if the offer doesn't go through now and Temasek offers to up it again. It happened before with Tiger Air. It looks like there is great political will to delist SMRT and nationalize it even though they say this is not counted as nationalizing.

Delisting means pokkai bankrupt.

frenchbriefs said:

Delisting means pokkai bankrupt.

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Delisting for this case means the shares have been mostly bought by a single investor.