SMRT

SMRT''s sound operations and financial viability stem from a supportive regulatory and transport policy framework. Under the current policy direction, bus and mass rail transit (MRT) operations do not compete directly; bus routes are adjusted when an MRT line opens to remove duplication of services. In addition, the government provides rail infrastructure at a nominal cost, relieving operators of the high capital cost and construction risk that burden rail companies elsewhere. A scheme of asset replacement grants for MRT assets, such as rolling stock, also eases the pressures of future capital expenditure.
SMRT has become a multimodal provider of rail, buses, and, to a smaller extent, taxis. The company is a dominant operator in the rail segment and a smaller player in the bus and taxi segments, with market shares of 25% and 14% (in terms of fleet size), respectively.
Cash flow measures remain very strong, with EBITDA interest cover above 16x and funds from operations to total debt above 75% in fiscal 2005. These measures are expected to remain strong given its steady cash flow generations. Although SMRT''s capital expenditure is relatively higher in the near term, debt to EBITDA is expected to remain below 2x.
Although SMRT receives no guarantees, explicit or implicit, as a government-linked corporation, its credit quality is enhanced by its 54.7%-ownership by the Singapore government (AAA/Stable/A-1+) through Temasek Holdings (Pte) Ltd. (AAA/Stable/--). Given the important public policy role that SMRT fulfills in providing essential public transport services in Singapore, Standard & Poor''s believes the government will continue to have a strong interest in ensuring SMRT''s financial health and viability, and expects it to remain supportive of the company in spite of its reduced shareholding.
SMRT''s liquidity is adequate. It had cash balance of S$82 million as at June 2005. The company has no debt due in one year. SMRT has strong access to funds from the banking and equity markets, given its strategic importance and status as a major government-linked entity.
The stable outlook reflects the company''s dominant position in the MRT segment, its very strong financial profile, and expectations that its robust credit profile will be underpinned by continued regulatory support. "The outlook or rating could be negatively pressured if the company''s growth initiatives and changes in the regulatory and transport policy framework adversely affect its credit profile", said Ms. Wirjawan.