Land Transport Sector - OCBC Investment 2015-11-24: LTA awards second bus package to UK operator

Land Transport Sector: OCBC Investment 2015-11-24: LTA awards second bus package to UK operator COMFORTDELGRO CORPORATION LTD S52.SI  SMRT CORPORATION LTD S53.SI 

Land Transport Sector: LTA awards second bus package to UK operator 

  • LTA announced yesterday that it has awarded the contract for the second bus package (Loyang) to UK’s The Go-Ahead Group (Go-Ahead). 
  • The Loyang package comprises 25 bus services that will be operated out of Loyang bus depot and two bus interchanges, which Go-Ahead will also manage. 
  • Go-Ahead will receive an estimated total fee of S$497.7m over the five-year contract period, which is expected to commence 3QCY16. Similar to the first bus package (Bulim), the Loyang bus package is also evaluated with higher weightage given to quality factor rather than price factor. 
  • Of the shortlisted bids, GoAhead’s bid came in the lowest, with the next lowest by Keolis at S$535.2m. 
  • As highlighted in our previous reports, we did not expect both CDG [HOLD; FV: S$2.99] and SMRT [HOLD; FV: S$1.43] to win as we believe LTA is using this opportunity to promote healthy competition, as part of the efforts to improve service standards. 
  • As the sector continues to be in a state of flux, maintain NEUTRAL on Land Transport sector given the mixed outlook. 
  • Refer to our latest land transport sector report dated 23 Nov for further details. 

Eugene Chua OCBC Securities | http://www.ocbcresearch.com/ 2015-11-24
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 2.99 Same 2.99
HOLD Maintain HOLD 1.43 Same 1.43