SMRT could face $50m fine for Tuesday's massive rail breakdown, says Maybank Kim Eng

Commuters at City Hall MRT station on Tuesday.
Commuters at City Hall MRT station on Tuesday.PHOTO: LIM YAOHUI FOR THE STRAITS TIMES

SINGAPORE - SMRT could get slapped with a $50 million fine for Tuesday's unprecedented breakdown on the North-South and East-West lines, Maybank Kim Eng said in a report on Friday.

Keeping its "hold" call on the stock, the broker said: "We believe that the regulators could fine SMRT for the service disruptions. This poses downside to our FY3/16 net income forecast of $119.4 million."

On how it arrived at its $50 million fine estimate, Maybank Kim Eng said:

"Recall that Parliament passed a bill on Feb 17, 2014, that increased the maximum fine for every rail disruption to 10 per cent of an operator's annual fare revenue for the relevant rail line.

"This was up from the previous maximum of $1 million. SMRT's FY3/15 rail revenue was $644 million for its North-South, East-West, and Circle Line. This suggests a maximum fine of $64.4 million for its entire rail network."

But as Tuesday's disruptions did not affect the Circle Line, the maximum fine could be closer to $50 million, said the broker.

Maybank Kim Eng's target price for SMRT is $1.57. The stock was trading at $1.485 at 11.15am, unchanged from Thursday's close.