SMRT Corp is a weird entity
SMRT is accountable to the public but it doesn't have to act like it is.
By Belmont Lay | 18 mins
Very few people are going to say this publicly, so here goes: SMRT Corp is a weird entity.
But because it is a company derived from the Singapore way of doing things, it might appear normal.
However, it is not.
Here’s why.
One year after delisting
SMRT was delisted from the Singapore stock exchange on Oct. 31, 2016. That was almost one year ago.
It was listed for 16 years.
Once delisted, SMRT was freed from the short-term pressures of meeting shareholders’ expectations.
The delisting was also to enable SMRT to focus on serving the public, without the distractions of being a listed company.
So, the next question to ask is: Did delisting nationalise SMRT or privatise it?
The answer is: Depending on how you see it.
Privatised or nationalised?
The main shareholder of SMRT now is state investment firm Temasek Holdings, which bought out the corporation.
SMRT also sold its operating assets to the Land Transport Authority (LTA) to become an asset-light company in the so-called New Rail Financing Framework.
LTA is, therefore, the manager of all of Singapore’s rail projects.
This means that SMRT as the transport operator cannot answer questions about infrastructure because it is not involved in the construction stage.
It is, however, responsible for maintaining the operating assets and is audited by the regulator, which is LTA.
Part of the state?
Still with me? Good.
With delisting, the lines are much clearer. Sort of.
Whatever future profits SMRT makes will go to Temasek.
Since Temasek is a state vehicle, in effect, profits are returned to the people of Singapore.
Temasek pays dividends to the Finance Ministry, and the money is used to fund public projects.
Everybody in Singapore became a de facto shareholder of SMRT as a result.
Moreover, under the new rail financing framework and government bus contracting system, taxpayers who are wealthier subsidise services used by the masses.
Previously, SMRT had been paying half of its net earnings as dividends to shareholders. This has led to accusations that it had been enriching its shareholders at the expense of commuters.
But, moving forward, SMRT’s margins are going to be smaller.
With delisting, its margin, a.k.a. earnings before interest and taxes, is capped at 5 percent in the new framework — lower than its historical margins.
continue reading here :
https://mothership.sg/2017/10/smrt-n...ed-privatised/