SMRT to hire more to cope with expansion

SMRT staff carrying out inspection and maintenance of trains at the Bishan depot. The rail operator has seen drooping profits as it expands its network and fleet of trains amid an ageing rail system.
SMRT staff carrying out inspection and maintenance of trains at the Bishan depot. The rail operator has seen drooping profits as it expands its network and fleet of trains amid an ageing rail system.ST FILE PHOTO

Higher headcount needed despite rise in expenses; analysts divided on prospects

Rail operator SMRT Corporation is set to hire more staff as it expands its train network.

Chief executive Desmond Kuek told a briefing by telephone yesterday that the group will look to bolster its staff numbers to deal with the extended network and a bigger fleet of trains.

"We will have to hire more to meet some of these requirements," he said a day after the transport firm unveiled its first-quarter results.

SMRT posted a 10 per cent fall in net profit to $20.1 million for the three months to June 30, down from the $22.4 million in the same period a year ago, although the turnover rose by 7.8 per cent to $320.3 million.

The lower earnings were due largely to drooping profit from operations, especially its core rail business, as well as higher expenses aimed at supporting the ageing rail system and meeting tightened regulatory standards.

Staff costs accounted for the biggest hike of $10 million.

SMRT said during the briefing that its headcount grew by 250 during the quarter. Year-on-year, it was higher by about 500.

Earnings per share for the quarter came in at 1.32 cents, down from the 1.47 cents previously.

Net asset value per share stood at 57.78 cents as at June 30, higher than the 56.47 cents as at March 31.

Analysts said the results came in below market expectations.

A CIMB report yesterday called the group's rail earnings "disappointing", while maintaining a "reduce" call on the stock, with a lower target price of $1.42.

"Widening rail loss and a potential fine for the recent rail breakdown are the key potential near-term de-rating catalysts for SMRT," it said.

OCBC investment analyst Eugene Chua maintained a "buy" call on the stock, given that "longer-term catalysts remain intact".

During the briefing, Mr Kuek said the group's taxi business continues to thrive, even as third-party booking apps are becoming increasingly popular among commuters.

"We're not seeing any particular impact at the moment. Our taxi operations continue to do well."

But he also acknowledged that such apps may pose future competition: "We're watching the industry development very closely and we are mindful of some of the impact of these apps."

SMRT shares have been faltering since hitting $1.80 in February this year. They headed further south following a massive train disruption last month that affected about 250,000 commuters.

The stock closed 6.5 cents down, at $1.395, yesterday, its lowest level this year.

A version of this article appeared in the print edition of The Straits Times on August 01, 2015, with the headline 'SMRT to hire more to cope with expansion'. Print Edition | Subscribe