May 23, 2014

    Transport stocks soar on restructuring

    LOCAL shares ended a smidgeon higher yesterday, with news of the public bus sector undergoing a major restructuring driving up transportation plays SMRT and SBS Transit.

    The benchmark Straits Times Index closed 3.88 points higher at 3,265.66, with SBS Transit jumping 18.5 cents, or 13 per cent, to close at $1.60 a share.

    From the second half of this year, the public bus sector will make a transition from the current privatised model - where bus operators SMRT and SBS own all buses and keep all fare revenue - to a government contracting model, the Land Transport Authority (LTA) said on Wednesday.

    Riding on the back of this, SMRT shares gained 3.5 cents, or 2.44 per cent, to close at $1.47, with 35.7 million shares changing hands.

    "If the bus model is going to be semi-nationalised, then it may be a question of time before the Government changes the structure of the rail industry," remisier Alvin Yong said.

    Shares of public transport operator ComfortDelGro slipped five cents, or 2.17 per cent, to close at $2.25 yesterday.

    DBS Group Research Equity maintained a "hold" call on the stock, describing the restructuring move as "positive for both the current bus operators SBS Transit and SMRT, as it should erase losses currently incurred by both".

    "The Government will also undertake the ownership of infrastructure and operating assets, which will lighten the burden on the operators' financing requirements and balance sheet, and channel funds elsewhere and/or for dividends."

    Meanwhile, LCD Global Investments gained 0.7 cent, or 3.63 per cent, to close at 20 cents. Some 41 million shares changed hands yesterday, making it the fifth most-heavily-traded stock.

    The property developer is the subject of a takeover bid by RDL Investments, owned by brothers Raymond and David Lum.

    RDL may possibly lift its offer price after some investors expressed anger over a takeover offer that they say is being made at a sharp discount to valuations.

    The Lum brothers, who together hold 31.1 per cent of LCD, are offering 17 cents a share for the property developer.

    Also fuelling hopes of a revision in the offer for LCD are moves in recent weeks by other takeover parties to sweeten their offers.

    68 Holdings, a company owned by hotelier Ong Beng Seng and Wheelock Properties, revised its offer for HPL shares from $3.50 a share to $4.

    Likewise, CapitaLand sweetened its delisting offer for CapitaMalls Asia with a higher price of $2.35 per share, after shareholders voiced their unhappiness over the initial offer of $2.22.

    LCD, formerly LC Development, has businesses that include high-end hotels and resorts, serviced residences and real estate consultancy.

    It is also developing an integrated lifestyle complex in Xuzhou in central China and a luxury resort in Phuket, Thailand.