GOOD ONE !!!!

First thing came into my mind was email this artical to all the MPs, OppMPs, NCMPs and NMPs….

They need more fund to supplement the heavy losses in the investments caused by their major shareholders. So any say from the gahman ?

Well, looks like Singaporeans had no choice but to tighten their belts & spend less. Let the service & retail sector suffers for all these.

I think you missed out NTUC which also generate profits, give out DISCOUNT vouchers and raise prices?

Additionally, do you think it’s possible to give details of the vouchers that are being given out by the respective companies?

The govt is also human, the ministers, the civil servants, the GLCs’ top guys, they are all humans.
These price increases also directly affect their families and all their relatives in Singapore. I am sure the govt will have a heart and look into making cost of living more tolerable for all citizens. Otherwise we are all choking & suffocating with the financial crisis at such a serious magnitude globally. We all need help from the govt to arrest this “self-inflicted” runaway inflation which is within our govt’s control.
During good times, it is okay for the govt to lecture all of us that there is no free lunch, that too much state-subsidised public services is harmful, that all govt-run companies must make profits and so on and so on. But if these GLCs are making the kind of profits we are seeing and yet still have the audacity to increase prices further during this difficult time then we must voice our concerns constructively. The sole objective is for the govt to really “hear us” and respond with a kinder pricing system – with a heart – for like I mentioned earlier, they, the ministers & civil servants, also have families and relatives, who must also be abdly affected, especially by the Electricity tariff increase of 22% when OIl price has dropped and is still dropping. I really hope the govt will hear us and respond positively. Make our lives more tolerable during this global financial turmoil.

“$3.6b – Singtel, which raised phone charges this week.
$1.086b – SingPower, which raised electricity prices by 22% this month.
$505m – S’pore Press Holdings, which upped its newspaper prices this month.
$150m – SMRT, which raised its train fares on Oct 1st.
$50m – SBS Transit which also raised its fares on Oct 1st. (Its parent company, ComfortDelgro, netted $223m last year).”

your analysis is incomplete without considering the rate of return on investment…
you need to incorporate ROE, ROA vs cost of capital analysis in order to conclude whether the profits are outsized or not. absolute numbers do not mean anything.

e.g. 1billion in profits on 100b in capital is only a 1% return (1/100), which is very very low.

indeed, if i were to use your argument, then Warren Buffett would be one of the most greedy people in the world, since berkshire makes billions in profits?

No.

You need to perform profitability and rate of return analysis in order to properly conclude whether the profits of these infrastructure companies are outsized or not.

Leong Sze Hian should be able to tell you how to do this.

inspir3d,

it is not the amount of money that signifies greed. After all, these are bread and butter services which should be enjoyed by citizens at a relatively low costs.

See lah, those people who deride the likes of JBJ are now enjoying their own fruits of supporting the PAP lah. Serangoon Gradens incident, the Mas Selemat incident, the prices just keep going up, up and away and nobody is there to fight for your human rights.

Good article… can we let the 66.6% read it as well? They are at the Core of these problems…. We need to evangelise (to borrow a term) more to these ignorant people out there on what is happening.. they are still living in mindless bliss.

I feel that a responsible government should do something about all the increases.

The first step should be the removal of `dubious’ taxes, like that on petrol, and the conservancy taxes of utilities usage etc. The GST that comes on top of them all should be calculated for the pre-taxed amount. Even the amount one pays as income tax is further taxed as part of one’s earnings for that year, in the following year of assessment!

Then perhaps we can all believe what the ministers said about making Singaporeans pay real market prices………….. not the kind that have been artificially inflated in the first place.

Perhaps the government is building up its resources to prepare for the next elections…………when it could then be very generous. If that is the case, then we can all be hopeful………..and grit our teeth for now.

Some of your points and anecdotal examples are valid, but NEWSPAPER? In layman terms I would say “get a life”.

There are many international newspapers and even free ones, and definitely we can live without one. If there are easily available substitutes then you should not mention it else you are going to complain about every bak chor mee price increase?

I agree with inspir3d as well. Your article is not objective and seemingly biased written with an agenda.

Any more talks to provide alternative commentaries to the people of the dot who get info mainly from the MSM?

How about this saturday?

These are hot topics of strong public interest.

Do the right thing!

Pragmatism is shallow.

Follow your ideals, sometimes!

The GLCs are making handsome profits and yet they still increase prices like there’s no tomorrow – like they are in a hurry to squeeze us for the last drops of blood – if we are lucky to still have some blood left ????

Actually, the CEOs who are running these profitable GLCs are working under tremendous personal pressure and stress. They must perform better and better so that their report cards look damn good to their bosses. Their financial rewards are also performance-based. So they have to work even harder to deliver more profits – until the dangerous point where they forget the greater good of society – or even worst when they sacrfice us, the ordinary consumers, to achieve their very narrow objective of $$$$ and more $$$$.

So, in a very significant way, the greatest flaw is in the financial-reward-system (or merit-based system) of measuring CEOs’ performances when it comes to running public services – one main cause of the pain we are experiencing now. The ideal situation is of couse, when the CEOs know how to (and wish to ) strike a healthy balance between personal financial rewards and gains and the greater good of society at large. Or “Reality” will hit home in some way or the other – and when that happens, we as a whole nation will suffer even more.

LLS #Post 1;

hi, all those people You mentioned ‘SHOULD BE MORE AWARE AS THEY ARE PARLIAMENTARIANS’.

They should have been the very people representing us to remind the Government of social and livelihood problems. The Netizens seem to be doing such duties for the Parliamentarians in SIN now. How laughable!

In any case, profiteering on the citizens by the Managers of the State is simply UNCONSCIONABLE AND SINFUL.

patriot

2) sunp on October 8th, 2008 9.50 am

Is it? Why does the people always, I say again, ALWAYS accept hikes of all kinds for decades and decades and decades and decades non-stop?

If I am wrong, show me 1 hike that is ever not passed through.

regards
Self-proclaimed Kangaroo ….meat lover.

“Consumer watchdog bodies such as the Consumer Association of Singapore (CASE) and the Public Transport Council (PTC) and the Competitions Commission all seem to be useless and worthless and toothless in helping curb such profiteering by these companies.”

as long as these bodies are not independent from the powers, people should not be naive that they have been created for the sole purpose of protecting and defending the people’s rights, interests or well being.

and i do not think corporate gain is all about greed for the simple fact that money talks. look, you are not going to get international accolades and foreign powers to respect our chief/s if your profit margin is like the kachumputeh man you know.

when you have CEOs running the countries, you need a lot of money to raise his profile in the international game of finance.

it is all about the man in power and what he is supposedly able to do for you.

power robs and power corrupts at the end of the day? is it self serving or is it self giving? who gets hurt eventually?

you decide.

See all the pics at : http://s478.photobucket.com/albums/rr143/stoompingg/

I think the government should not be attempting to cushion every price increase and fostering a crutch mentality among Singaporeans.

That said, I still think that there should be a balance between economic pragmatism and social welfare. If any government governs a country based on pure economic pragmatism that would be a very sad situation indeed. A mandate to govern comes with social responsibilities i.e. going beyond token measures to help the struggling masses.

In the face of soaring inflation and pending economic gloom, prcie increases on such key services and goods like telecommunications,public transport services and newspapers are insenstive. They exhibit a lack of compassion on the government’s part.

The very irony. The government has no qualms in splurging big money on greedy Western banks; yet it has a huge issue with alleviating transport costs in a meaningful way.

Life is more than about economic theories . It is about having a heart.

Our government will probably point to its track record and give a patronising lesson on the economics that necessitates price increases.

I say, there is a balance between long term measures and short term measures. Any responsible government will balance them properly. We cannot be pouring big money only into “long term investments” like rotten Western banks. We need to be investing in the future, as well as the PRESENT welfare of the people.

I think that the people are not asking for subisidies on the scale of Temasek or GIC investments; we merely ask for more than the token concessions currently given.

The PAP always says that it views the economic and material welfare of the people above boisterous claims for democratic expression. Well, it’d better be doing a better job regarding the former for now.

inspir3d (#6):

Computing the EBITDA margin (ie. EBITDA/Revenue) is sufficient for quick comparison. Values are from their respective 2007 annual reports.

Singtel = $4,540M/$14,844M = 30.6%
SingPower = $2,103M/$5,446.8M = 38.6%
Singapore Press Holdings = $634,391,000/$1,172,442,000 = 54.1%
SMRT = $273,293,000 / $743,126,000 = 36.8%
SBS Transit = $87,961,000 / $670,042,000 = 13.1%

A healthy EBITDA margin is usually between 10-20% margin whereas an EBITDA margin exceeding 30% is regarded excessive by the standards of many overseas industry regulators. Singtel, SingPower, SPH and SMRT are clearly doing too well at the expense of Singaporeans. I can’t see any good justification that the competition commission or PTC would approve the price hikes for these 4 companies.

Tired of all these lame excuses to raise prices & fatten their pockets.

Wonder what’s next?

Prices of food and commodities increase due to electricity hike?

Nope… that’s the primary effect only.

Secondary effect:
Foreign firms and corporation moving their factories to Malaysia (or nearby Asian cheaper countries)..
Singaporeans lose their jobs.. Gahment lose their taxes, need to attract foreign firms & corporation again..
cannot have minimum wage (set up business in Singapore is costly enough),
this time get a pay-cut so that they willing to invest here.
gahment allows price increase for their services or goods provided to us so as to make them stay here.
no point voicing out how you are being fleeced because gahment won’t do anything against their vested interest.
The vicious cycle goes on & on.
Many couldn’t take it & are planning to flee.
Most already fled to Australia or US.
Not enough people here thus need to import more foreign talents.
Better import more than needed else the economy cannot function when there’s a sudden outflow of people.
Life is hard, birthrate is down, increase birth incentives or else population of singaporeans become disproportionate.
That doesn’t help when prices increase subsequently, couples drop their babies plan.
And what’s left of the little red dot?

Its actually $3.96b after-tax profits for SingTel. This includes 66% revenue contribution by Optus in Australia. At least in SingTel’s case, ordinary Singaporeans were given shares ie we get dividends (I wonder if part of it includes Australian profits). With 1,000 shares, one would have gotten ~$160 last year. Unlike ERS, dividends are continuous with shares so long as the coy is profitable.

Still, I agree its a lot of profits…In any case, with mobile phones, less and less people use fixed line.

My worry is that someone will take a look at SMRT figures, compare it to SingTel’s and say that’s not enough.

Compare the frequency of price increases between the 2 differing services and its clearer if this is what’s happening.

And then SingTel, SPH, etc looks at SMRT and say if SMRT can do it that frequently, why can’t we?

21% increases in electricity price is very, very steep. That considering that oil price have dropped from $148 to $8X representing a 40% drop.

Whilst SMRT fares gets a price increase due to oil increase, there won’t be a price decrease when oil price decreases. No such mechanism. That’s the fallacy of the system.

I think Jack works for the govt….mybe he is in the civil service…way to go jack

“Computing the EBITDA margin (ie. EBITDA/Revenue) is sufficient for quick comparison. Values are from their respective 2007 annual reports.
Singtel = $4,540M/$14,844M = 30.6%
SingPower = $2,103M/$5,446.8M = 38.6%
Singapore Press Holdings = $634,391,000/$1,172,442,000 = 54.1%
SMRT = $273,293,000 / $743,126,000 = 36.8%
SBS Transit = $87,961,000 / $670,042,000 = 13.1%
A healthy EBITDA margin is usually between 10-20% margin whereas an EBITDA margin exceeding 30% is regarded excessive by the standards of many overseas industry regulators. Singtel, SingPower, SPH and SMRT are clearly doing too well at the expense of Singaporeans. I can’t see any good justification that the competition commission or PTC would approve the price hikes for these 4 companies.”

EBITDA margin is NOT a sufficient measure. EBITDA excludes the capital expenditures which can be highly costly to Free Cash Flow.

I reiterate my statement that you have to perform an ROE/ROA or IRR analysis in order to analyse the returns on investment. Profit Margins are NOT sufficient.

i am merely trying to point out the incompleteness and the flaws with your financial analysis.

if you are going to present financial arguments but your financial analysis is unsound, nobody is going to take you seriously.

do you correct and appropriate financial analysis and your arguments will be much stronger

23) inspir3d on October 8th, 2008 3.16 pm
24) inspir3d on October 8th, 2008 3.20 pm

Hey good explanation and analysis.

So what do you think. What if I say that even with a high ROI (even after accounting for depreciation or whatnots or you just name it as many as you like) still does not tell you much about the efficiency of the company in the context of monopoly / oligopoly on some important and essential services. In short, no real competition.

Because you can simply jack up the prices (the most important & flexible variable in a monopoly) of services given the nature of it being treated as Ah Kong funds – the customers do not much choice except to pay & yes to protest loudly (if it is allowed here & if it does escalate into something translated as security issues).

Talking about protests. Just compare Singapore with Hong Kong (a society which can give us a respectable fight as far as benchmark is concerned)

Andrew, it is not greed. this is all done for our own good, so that no one can “do us in”.

If they dont raise the tariffs and profits, how else are they going to raise funds to acquire all the companies around Asia and beyond? Its such a quick and easy way to raise money.

electricity tariffs to go up? well, SingPower has plans to buy up all the power plants in the region. of course they need money! they cant always depend on CPF and fines, can they, since they’re reducing corporate taxes?

its all taken care of. which other country in the world has govt departments taken on the role of investment managers? we read so many stories about town councils, govt depts making investments…even religious organisations. only in Singapore!

once we have control over telcos and power plants and airlines in the region, then we have control over our neighbours. Then Singapore will continue on its path of Golden Growth, as MM Lee said.

I am waiting for the day when Mediacorp/SPH will start competing with Rupert Murdoch or Ted Turner. Our casinos will also be better than the rest of the world – Macau only has F3, we have F1!

and once these companies make money – they will share it through the singapore shares. we can enjoy the best transport/port/ financial/legal system in the world, a virtually crime-free society, a country protected against terrorism and any foreign military, where there is no unemployment, everyone is a homeowner etc etc.

We may be a red dot, but no one is going to mess with this red dot.

All we have to do is just work, pay our taxes, pay our loans..just dont question them, please. everything else is taken care of.

“26) aygee on October 8th, 2008 3.40 pm
once we have control over telcos and power plants and airlines in the region, then we have control over our neighbours.”

Hey, imagine the nationalistic sentiment that one can easily fan in the host country and you are in for it. Singapore does have a string of experience on this which will definitely look good in its resume.

Certain host countries just do not have the culture to be ready to see their own national darlings being privatised away to another country (oops to another private entity which so coincidentally may be owned by a national sovereign funds of another country).

Please bear in mind, a lot of other sovereign funds are due to something from heaven or earth (e.g oil).

Now make a guess where ours comes from. (no prize for getting it right).

http://en.wikipedia.org/wiki/Sovereign_wealth_fund

#26 aygee says: “It’s all taken care of”. Really???

“Ignorance is bliss” – as one saying goes!

“See no evil, hear no evil, speak no evil” – as another saying goes. Somebody forgot to add “Just do evil”.

The Pariah, singaporeenbloc.blogspot.com

another point i would like to make is that painting the corporate sector as greedy is often uncalled for and unfair. there are many public service providers that have made losses, and have even gone bankrupt while serving the public (take example the failure of the rail franchise in victoria, australia, where a couple of operators went bankrupt).

a proper public services system needs the cooperation of both the public sector and the private sector. the government needs to provide a sound regime that allows the private operator to earn an acceptable return, otherwise nobody is going to invest in the projects, and nobody is going to provide the power, transportation and telecoms services that are vitally important to a functional and prosperous economy.

on the other hand, the licence regime needs to protect consumers from oversized profiteering. this is where i feel the government has fallen short, and this is the fundamental issue that needs to be addressed when discussing public services in singapore.

The common denominator in all the companies quoted – they all have the “Singapore” in their name. (You left out Singapore Airlines). What does that tell you? Also, they are all effectively monopolies, duopolies or oligopolies – hence the super-normal profits.

Don’t forget DBS. Remember the $2 charge for account? I do

I think someone called it “damn bloody slow” once… Even here, takes 30 post to get mentioned. :-)

Great article – TOC’s best ever!

Makes you wonder …..

What is public service?

What is servant leadership?

27) inspir3d on October 8th, 2008 4.13 pm

“public utilities and infrastructure providers around the world are usually natural monopolies. this is because there are massive economies of scale in providing such services (such as a railroad, a powerplant, or fixed line telecoms services). in order to prevent the providers of these essential services from abusing their monopoly power at the consumers’ expense, these essential services are highly regulated.”

Good explanation. ROI just gives you % which still does not address the real efficiency issue. Perhaps let me illustrate.

Country A (population 4.5 million person trips) = 10million profit / 100 millions assets = 10% but price per person = 2.22 unit dollars

Country B (population 4.5 million person trips) – 9million profit / 90 million assets = 10%
but price per person = 2.09 unit dollars

Country C (population 4.3 million trips) – 8.9million profit / 90 million assets = 9.88% but price per person = 2.06 unit dollars.

Assuming all other things being equal like landmass, etc which is not in reality.

Any organisation with a higher ROI can claim better utilisation of assets. However, I tend to feel your explanation (suggestion ?) of outsized ROI more believable in our context – having seen this Copperfield act done on us all too often.

Please bear in mind, our country is small & compact, therefore infrastructure cost per unit of area coverage should be much smaller whereas in a big country, the area coverage is much bigger where the population is more widely dispersed.

Plus, they have added dramas that we do not have (e.g union strike to be perhaps beautifully matched up by an equally responsive commuters’ strike if they are not happy with certain services). All these contribute to added costs.

And they do have a wonderful common understanding to scre* their regulators (government) if the latter do not play ball. I am not saying through speculation, I have talked to people (of course they are foreign talents lah).

Hi. This is a little passage that I created to comment on the situation face by the majority of Singaporeans.

My Tuesday are meatless
My transit card is worthless
My utilities bills are endless
My month flat installment is ridiculous
My investments are in pieces
My job hours are ever-creasing
The time spent with my family are lessen
My life is lacking liveliness
The rebates given are pointless
Everyday I get poorer but wiser
God Damn, I do hate the self serving government

Unless you nationalised the companies, the price increase is here to stay.

The 1st goal of a company and its CEO is to MAXIMIZE SHAREHOLDERS VALUE.

Further, the listing of the companies means they are in more pressure to have earnings growth.

Essentially, it is a conflict of interest between a public operator and a listed company.

inspir3d (#23):

Free Cash Flow (FCF) = EBITDA + Change in Net Working Capital (NWC) + Capital Expenditure (CAPEX)

I don´t see the point to continue arguing with you over the technicality on EBITDA vs Free Cash Flow. I merely wanted to use a simple indicator to inform the average layman than rather confuse them with complicated sounding terms.

However, I feel the need to add the point that if EBITDA margin is healthy while the FCF margin is relatively low due to massive CAPEX, then it is clear that consumers are being charged a lot to fund internal investments than rather using financial surplus accumulated over the years.

Nevertheless, you made pretty good points on the market of essential goods and services.

Excuse me why can’t I post?

Inspirid check your tmr, Harphoon wants to contact you, by the way you always need to check the net value of yr cap? yeah. Otherwise how do you determine your net asset value against opportunity cost? Think about that. If you need help we will come in and help you this is easy peasy

Singapore daddy

Your e-mail that we used to contact you with I mean.

some people lost their heart and soul somewhere along the way up… hmmm.

Whatever the rate of returns, the fact that these are Govt-linked companies, providing essential services, to me at least, mean that they should be sensitive to the circumstances of citizens – especially at a time when the economic outlook isn’t that good, uncertainty with the stock market and the last two years of rising cost.

And if such companies are already making profits – some even record profits for the last few years, like SMRT – then we have to question if they are run with public good as their intention or greed as their driving force.

To just look at the ROA or ROI or ROE and conclude that because they are just “1%” they are or may not be doing that well, is to ignore the reality that these are providers of essential goods.

I think many will agree with me that if such companies make half a billion or a billion dollars in profits (net profits, mind you), they should be quite happy with it and not seek to squeeze more out of Singaporeans.

It is true that I am no financial expert. But sometimes, it is the non-expert which can recognise financial or monetary greed better than the experts in the field.

Money is the road to all evil, we have few hundred $$$billions in our reserve, do you guys agree? Money buys power, they control ppl, even saints can turn into devils overnight . . . vote for them some more lah! serve you right!

It’s a cliche but still runs true; power corrupts.

Although the global financial meltdown is a disaster to say the least, on the brighter side, I think the not-so-kind-and-honest-bankrupt rich people should think that this is a golden opportunity for them to prove that they are not a flash in the pan but rising from absolute poverty to rise again and reach the top again as multi-millionaires. So, if rich but evil people go bankrupt due to meltdown, they should thank their lucky stars for this chance to prove themselves.

evil and rich people go bankrupt also is part of financial ecology and if this does not happen, the evil and rich will forever remain rich. But I hope the rich and evil who go bankrupt down think negatively and jump when the stock maket also plunge.

MIW says and act in all…

What is public service?
Ans: Money

What is servant leadership?
Ans: More Money

MM Lee = Money-Maker Lee , no wonder he called himself MM Lee.

“Please bear in mind, our country is small & compact ”

On top of that, most importantly there is NO NATURAL DISASTER in Singapore, only PAP-MAKE DISASTER etc exorbitant money losing investment but still white-horse get away, cover-up, ShittyTimes, Price Hike like nobody business. Compare to other countries like Thailand, Taiwan, Hong Kong, Japan etc, we are lucky that God bless us with no natural disaster but the devil is running the country.

With the rate going for all these enomously huge self-approved salaries + the $$$billion lost in foreign investment funds, our nation reserves would be empty in no time. No wonder, they have to start selling off our power stations and other nation resources to make the balance, not even to mention our life long working contribution of CPF monies are as good as all GONE! These are all no different to daylight robbery. Hope not to see another similar thaksin case around, who knows, there is no transparency or accountability at all in our system.

The huge amount of reserves that Singapore was due to the prudence and hardwork of all Singaporeans. It should not be seen as a evil or greed. In the current economic turmoil, these reserves act as a buffer to cushion our export-dependent economy. Compare our economy with Iceland whereby the country is practically going bankrupt due to the huge debt of the financial institutions.
We seem to have a lot of socialists in the forum. How about giving tax-payers money to those companies if their EBITA drops below 10%?

“40) singaporedaddy on October 8th, 2008 8.33 pm
Your e-mail that we used to contact you with I mean.”

ok will look out for it

Public service privately-run
Profits unlimited, accountability none.
Monopoly good for everybody
Don’t be a busy-body
Complaint and complaint
You will get delayed trains.
Come next election
See who got the rations.
Cheers to all Singaporeans.

“Whatever the rate of returns, the fact that these are Govt-linked companies, providing essential services, to me at least, mean that they should be sensitive to the circumstances of citizens – especially at a time when the economic outlook isn’t that good, uncertainty with the stock market and the last two years of rising cost.
And if such companies are already making profits – some even record profits for the last few years, like SMRT – then we have to question if they are run with public good as their intention or greed as their driving force.
To just look at the ROA or ROI or ROE and conclude that because they are just “1%” they are or may not be doing that well, is to ignore the reality that these are providers of essential goods.
I think many will agree with me that if such companies make half a billion or a billion dollars in profits (net profits, mind you), they should be quite happy with it and not seek to squeeze more out of Singaporeans.”

well, Andrew, your argument is not a financial or economic one; it is an ideological one that says that the private sector companies should provide services independent of the rate of return on capital the companies are earning.

your argument effectively invalidates capital markets and market economies when it comes to public infrastructure; and is more or less akin to saying that essential services should be nationalised and operated by the government. this is because no private company is going to run a power plant or wireline telecoms if it can expect only a 1% return. the logical extension of this argument is that the government will operate, and bear the cost of these essential services.

but this is just a way of passing the buck from the consumer to the treasury. instead of monies coming from commuters or consumers, the monies come from the government coffers which are funded by taxpayers anyway. so, either way, you still have to foot the bill. either that or the government goes into massive debt, which has deleterious consequences on the competitiveness of the economy.

finally, it is not a matter of just “being happy with it.” if a company is unable to earn its required return on capital, its debt holders and equity holders will withdraw their monies and cut back on capital investment in infrastructure. this has even greater deleterious consequences on the country’s economy as it will have subpar infrastructure… just look at the many 3rd world countries around the world and you will see the effects of infrastructure underinvestment

49) Eaststopper on October 8th, 2008 9.47 pm How about giving tax-payers money to those companies if their EBITA drops below 10%?

Why not? but do you think the garment will agree?

——————————-

Computing the EBITDA margin (ie. EBITDA/Revenue) is sufficient for quick comparison. Values are from their respective 2007 annual reports.

Singtel = $4,540M/$14,844M = 30.6%

SingPower = $2,103M/$5,446.8M = 38.6%
Singapore Press Holdings = $634,391,000/$1,172,442,000 = 54.1%
SMRT = $273,293,000 / $743,126,000 = 36.8%
SBS Transit = $87,961,000 / $670,042,000 = 13.1%

A healthy EBITDA margin is usually between 10-20% margin whereas an EBITDA margin exceeding 30% is regarded excessive by the standards of many overseas industry regulators.Singtel, SingPower, SPH and SMRT are clearly doing too well at the expense of Singaporeans. I can’t see any good justification that the competition commission or PTC would approve the price hikes for these 4 companies

Greed of the government never stops here

Lucky Tan wrote a interesting and enlightening post on how greeky politicians works. It is a compulsory read

http://singaporemind.blogspot.com/
Here is the partial extract from Recession is here!

“There is little doubt that the current crisis will worsen before it gets better. Politicians everywhere in the world can look good during the good times and govts can claim they have a successful working system in place because the strong global economy masks the cracks and weaknesses in their system. Income inequality, rising costs, losses in bad investments and profiteering by state owned companies are somewhat tolerable for most people during the good times because they don’t stop to think when the assumption is their own income will rise over time. But when bad times come, the lack of a social safety net, the runaway greed of govt monopolies and lack of transparency handling tax payers’ money will become unacceptable to the citizens. Of course, in some countries, these govt monopolies may so greedy, they will find ridiculous excuses to hike prices knowing that it is harder to do so when things get worse. Crisis is the cure for indifference, complacency and apathy. It is the fear of becoming jobless that makes one care for the jobless…the fear of poverty that makes one care for the poor….when one cannot pay for the price hikes…he will understand what is wrong with system. They say crisis will bring out the best in people. ….and crisis will bring out the best in leadership. We are all waiting to see the best from our leaders who are the best paid in the world…and lets see how good their “best” is.”

Why Singaporeans never learn. It is their own greed to blame. Price increases
between general elections has been the norm and has been done for the past four decades.
But peoples’ memory are so short. Come election time a few hundreds bucks will be given away to each electorate and people will queue for it and easily forgotten the hard live they have had.
It’s not the government’s fault for they they are humans too. If the peoples’ greed is their reward they will keep on repeating it until it fails. Until it does expect to see more of the same. MPs will have their reward too.

CASE, CCS and PTC are simply rubber-stamping puppets created by the govt to give the misleading impression that they care for the population.

Many GLCs are here to provide cushy jobs for “retired” mini-stars.

Singaporeans, its time to WAKE UP!

inspir3d,

Last year, the PTC did not approve fare hikes for SMRT. In previous years, as everyone knows, SMRT and SBSTransit – and even some PAP MPs – were citing doomsday scenarios if they didn’t have their fare hikes.

Guess what? SMRT went on to make record profits.

Keep in mind this point: The PTC is there to regulate a supposedly private company.

So there.

i did not say there is anything wrong with regulating a company that provides public services

nor did i ever say the fare hikes were justified.

neither did i say that fare hikes should ignore the plight of the people.

i am merely pointing out that a financial argument needs to be sound before it can be taken seriously.

that is all…

regards

inspir3d,

I understand your point and I will try and do better in future.

On my side, I understood your argument as being one which said that private companies should not be expected to lower their profits – in a nutshell.

My citing SMRT is to show that in S’pore, sometimes being “private” is a dubious thing – when such “private” companies can be directly overseen by a council such as the PTC and which directly makes decisions for the transport companies, affecting their profits.

The point is this: If the govt, through the PTC, can regulate the profits of a supposedly “private” company such as SMRT, why then does it not do the same for other govt-linked “private” companies?

One cannot have his cake and eat it.

This is why I do not buy the argument that we should look at the ROI or ROA or whatever. They seem to be used selectively. (Case in point again: When the PTC disapproved of the fare hike for SMRT last year, its ROA was cited as being enough – some 7%, if I am not wrong. Yet, this year, there was no mention of SMRT’s ROA at all when the PTC approved the fare hike.)

So, you can understand why Singaporeans may be skeptical about a “financial” argument.

But thanks for pointing out my shortcoming. I will try and do better next time.. :)

Hi andrew.

“On my side, I understood your argument as being one which said that private companies should not be expected to lower their profits – in a nutshell.”

no, u misunderstand, this is not what i am saying.

what i am saying is that the proper benchmark for analysis is profitability, not profits.

let’s try to do a proper profitability analysis of SMRT.

the businessweek info page is very useful

http://investing.businessweek.com/research/stocks/financials/ratios.asp?symbol=SMRT.SI

you will see that SMRT’s ROA is 7.07%
SMRT’s Return on Capital is 10.01%
its Return on Equity is 21.83%

SMRT’s profitability ratios are all in the top quintile of industry comparables i.e. SMRT is amongst the top 20% most profitable transportation companies in the world (see the boxes below the numbers)

Similarly, its gross margin, EBITDA margin, and levered cash flow margin are all very high, all in the top quintile.

from this profitability analysis, you can see that SMRT is making much-higher-than-average profits.

Now, if we draw the principle that an acceptable profitability is for SMRT to earn average profits, then we can make a strong case that not only should SMRT NOT raise tariffs, but it should instead LOWER tariffs.

This is an example of sound financial analysis that would make your arguments much stronger.

cc. Gerald – i think this is the kind of analysis you are looking for in your email to me

hmm looks like my last comment got censored by the spam machine :)

inspir3d (#52):

To just look at the ROA or ROI or ROE and conclude that because they are just “1%” they are or may not be doing that well, is to ignore the reality that these are providers of essential goods.

Actually, these numbers are published. Just gotta dig up equity research reports. They are definitely no where near 1%. For example, Singtelś ROI and ROE is 18.9% each, while Return on Assets is 11.8%. These indicates that Singtel is extremely profitable.

Inspir3d

I think what Mr Loh may be trying to say although I suspect he may not know how to put it across in financial terms is this; instead of the transport operators depending on a fixed rate of amortization to determine the ROI and ROA / it would serve the general interest of the public better if they used a floating rate pegged to price index and general living standard rate instead.

I believe in most well established transport concessionaries (as they unlike us, don’t believe monopolies serve the best interest of consumers) subscribe to the use of the floating FRA if you look at Virgin rail operations in UK and even the Tokyo Metro managed by Teito authority / they are all without exception using floating rates of amortization and in some cases not only is it pegged to price and inflation index but they have gone two steps ahead to even use activity based costing to best optimize their service metrics /

Now I believe the whole issue in this thread; is whether SMRT is using ALL this high tech accounting procedures to good effect to best serve the interest of users?

Or are these monkeys just relying on pre-1965 orthodox and standard accounting procedures sinc they are already public listed? If it is the latter, then I say Inspir3d, you are 100% on all the pointers, but if it is the latter then I will say you are maybe only 50% on the scorecard / as firstly not only is there no provision for flexibility, if one relies only on standard accounting but it is even arguable, it skewers the picture as it doesn’t take into account operational aberrations e.g I think it makes sense to automate rail operations in Stockholm, but I don’t believe it makes sense to do the same in Kampala, as the cost to users would be exorbitantly high.

What I think Mr. Loh may be trying to say at a philosophical level is when the cows come home to roost; ordinary folk are suffering, they pay is not going up, but transport is going up. So something cannot be right. It may seem like a simple argument, but what he may be trying to say on an ideologically level, is it may not be such a wise idea to believe the public transportation sector can be managed solely by the laissez faire approach i.e. markets will always find equilibria. He probably believes some interventionist policies are required mitigate the unbridled aspects of free marketeering – I agree some what with him, as you have mention quite rightly, there is indeed public infrastructural under investment – however that also requires you to concede the reverse not only for transport related businesses, but the same can be said for even merchant banking> otherwise how do you think the ceo of lehman bros managed to get paid $250 mill? – Why is this point so important? Because what is missing from this discussion is (1) a common sense approach to define organizational success the question, I believe most public transportation users are asking is whether enough has been done in those areas to mitigate and control public over investment. I for one cannot understand why a world class British architect needs to be contracted to design a train station in EXPO. I also cannot understand why there is a need to spend X hundred million to put a glass wall partition to prevent people from committing suicide / I find the formula for calculation return of pay out quite bizarre and I am not sure you would even get the best transport operators to agree with SMRT. In fact, I may want to take further interest into how they do their calculations.

Do you understand? Nonetheless good, very good and robust fight.

SD

I may just decide to drop the asdf a line to ask them to study this matter deeper.

reg

SD

“49) Eaststopper on October 8th, 2008 9.47 pm

We seem to have a lot of socialists in the forum. How about giving tax-payers money to those companies if their EBITA drops below 10%?”

Do not worry lah. If EBITA really drops below 10% and it is really due to inefficiency with other key ratios (e.g $$$ per distance unit covered, headcount cost, etc) also underperforming.

Well, you need to change management or have new players who have sophisticated means of galvanishing fundings and are willing to capture whatever value there is from this inefficiency. You are in finance right and you should know the trick.

Why sell our 3 Power Stations ?? Are these not our Startegic Assets ??
What happens if the new owners keep increasing electricity prices on us ?? What happens if these new owners decide to resell the power stations and they are inadvertently bought over by countries hostile to Singapore ??? So many questions and we are really concerned.
We got to trust our government. They must have looked into all these concerns before they decide it is in our (Spore’s) best interests to sell them to foreign companies. After all our Ministers are all specially selected and groomed from the Best of the Best. If we, the ordinary peasants, can think of all these potential dangers, I am very sure our Ministers would have considered them already. Hope that the govt can give us some logical answers so that we don’t have to make wild guesses.

“49) Eaststopper on October 8th, 2008 9.47 pm
We seem to have a lot of socialists in the forum.”

What socialists lah. We are paying lah. Just that we do not want to pay more than necessary lah. Socialists no good meh.

Frankly, a lot of countries are practising a little bit of socialism, communism, capitalism, monkeysism, etc here and there selectively over various issues as and when it suits them lah.

So how do you describe “bailing out” of subprime in US – capitalism or socialism or communism.

this is a very sad truth..

the companies take the chance to increase price juz before the announce of our expected recession (most likely) this friday..

when more of our national assets corporatised, accountability to the shareholders is an excuse to increase price.

would the major shareholder of comfortdelgo, sph, singpower spare a thought for us, the people of singapore?

would PTC and EMA consider the impact of our people before allowing the price increase?

many people are struggling to keep up with inflation and are unsatisfied of the price increase, especially the 21% electricity tariff hike. Many have voiced concerns about it.

But the question is the same as before:
are our voices heard by the relevant authorities?

we’re having a tough fight putting our concerns through official channels. is there any way we can communicate with the authorities to answer our concerns?

we can pen our thoughts, but if there’s no one listening, no action will be taken.
i hope something can be done about it.

Anyone checked the board of directors of these companies? any MPs or ministers?

I recall in my Public Finance class back in uni…

Perfect competition is always best for the consumer – because it brings about efficiencies, from pricing to operations.

But for utilities, a basic necessity, it needs to be govt-run or highly regulated, to make sure they deliver this utility to the people.

The argument has been whether a public utility can be allowed to work at a loss, which can be subsidised by other fiscal or monetary policies of the govt.

Now, in HK, CLP has reduced tariffs by 3%, which now regulators are saying its too little, considering the price of oil. Already, the govt will be handing out subsidies over the next financial year, because of their surplus in their budget from the previous year.

interestingly too – in some parts of HK, you can also choose between 2 or 3 utility companies. They are separate entities (not owned by a Temasek-like company). You can imagine the efficiencies gained by the consumer in this instance.

I have seen this many times in the news – where Legco and NGOs and unions fight for the consumer, the HK people.

Now – for singapore – as we have discussed many times over – the Constitution nor the govt seem to want to protect the people or the consumer. It seems that we are more inclined to protect and help businesses.

Just today, the judiciary allowed three bars to continue smoking indoors, because they felt that the Health Dept had a flawed process to decide the smoking ban for entertainment places.

This system places checks and balances, and makes sure the govt are constantly on its toes when they execute. Compare this with the Mas Selamat/WKS issue.

I am not very well versed in all this, but can singaporedadi pls explain why the accounting procedure is so important. That it is even everything, Correct me if I am wrong pls. From what I have been able to read of what Andrew wrote he seems to be making clear and concise points which seem to make alot of sense. As for inspir3d, he is quite cheem, but again he does seem to come through it all, but in your case, I dont really understand what you are getting at. I am not saying you are wrong. Only perhaps you should not assume everyone can understand you people so easily. Perhaps you can break it down into understandable bites. And share with us all what you really mean, when you say, if Inspir3d is assuming this, he gets 100%, if he is assuming that he only gets 50%.

Thanks. I always like to learn something new and I am not afraid to ask further if I dont know.

“Anyone checked the board of directors of these companies? any MPs or ministers?”

Remember they pass a law not long ago to prevent private investigation of these coffers here. Will pinkish clown investigate his own coffers when he himself is liable for investigation due to conflict of interest ?

We have so much Chen ShuiBian in our countries and we can even laugh at Taiwan. How ironic. There is no President Ma here to bring the check and balance in the government but prataman here who guard the old fart who feed the dog golden bone instead. There is people’s power like Hong Kong to bring the government’s accountability. Only the citizen to suffer oppression in Singapore.

“What I think Mr. Loh may be trying to say at a philosophical level is when the cows come home to roost; ordinary folk are suffering, they pay is not going up, but transport is going up. So something cannot be right. It may seem like a simple argument, but what he may be trying to say on an ideologically level, is it may not be such a wise idea to believe the public transportation sector can be managed solely by the laissez faire approach i.e. markets will always find equilibria. He probably believes some interventionist policies are required mitigate the unbridled aspects of free marketeering – I agree some what with him”

hi singaporedaddy,

yes i agree with this. i fully agree with Mr Loh that transport fares should not be going up when the income of the average man on the street is stagnant.

in fact, i personally disagree with the transport fare hikes and the electricity fare hikes, as i think that these public service companies are making outsized profits.

on a philosophical level, i think we are mostly on the same page that the cost of essential services should not rise when the pay of the average worker has not risen.

however, what i disagree with is the way that Mr Loh is making his argument.

all i am trying to do is to show him that his financial analysis needs to be more robust in order to be taken more seriously. (ref comment #62)

the way he pointed to absolute profits in his original post, would be torn down very easily by someone financially trained.

on a philosophical level i think we all agree that government regulation and intervention is necessary in the realm of public services in order to maintain quality and affordability of service.

regards

inspir3d, look like you are a financial expert yourself so rather than point out error after post publication, why not help Andrew to pinpoint the error prior to posting and help him to strenghten his argument using financial anaylsis ? Since you post your remark shows that you are insatisfied with certain things handle in government and that you hope to see change.

Daniel,

i already did. i gave an example in comment #62.

any more and i will have to give classes in financial analysis.

in any case my firm provides consulting services and we have already been consulting to the IDA and the LTA involving the MRT financing framework and the next gen NBN…

but it will take time for me in order to have a detailed and thorough understanding of how things work. but at least i will have a view from the inside.

regards

Hi Gymrat,

“I always like to learn something new and I am not afraid to ask further if I dont know.”

OK fair enough.

Let me endeavor to explain my confused point further. My main point is both Inspir3d and Mr Loh may be both right and also wrong at the same time. It really depends where they stand and view the issues.

In the case of Mr Loh, he is not right because of his financial underpinnings. In fact he is so wrong there that I really don’t even know where to begin to correct him. All I can say is if you forward that sort of POV online, you cannot blame someone for taking you to town a few times round.

Having said he is wrong on his financial underpinnings. He is only too right philosophically. As what he seems to be saying there is govt needs to come in to regulate transportation instead of leaving it to free market to sort itself out.

On that front he is not only philosophically correct, but in econometrics terms, he is very sound. As there is plenty of evidence to suggest when it comes to basic necessities (which transport definitely falls under as a categorization), it may be wiser for govt’s to adopt an interventionist approach towards stabilizing prices rather than leaving it to the free market laws of supply and demand.

To your second question, why is the accounting method so pertinent to the whole discussion?

That’s simple, the accounting rules is no different from the rules of any game – they define a win, draw or lose scenario. They also happen to set what we typically term key performance indicators such as revenue recognition and return on investment etc.

Now you would think accounting has no relationship with performance, but my point here is, it has everything do with performance – that is why before jumping into the analysis, it may be a wiser option to ask what sort of metrics are being used here to justify these price hikes? How do they fair in comparison to other benchmarks internationally? Are we talking about best practices normally associated with transportation companies?

How does accounting affect performance?

Consider this, if you measure the productivity of a glass factory using surface area processed, then don’t be surprise, if the factory management will start producing thin walled glasses. Now you can say so what? I say, so a lot! As I can very well argue this not only balloons both the transportation and packaging cost, but these glass products may be so fragile the breakage rate may prove an economic disincentive in the long run so as to negate whatever gains I may get at factory side.

Alternatively, if you decide to measure productivity in the same factory based on tonnage processed instead, then do not be surprised, if the factory management start to produce glass goblets; again you can say, so what? And I will say again, so a lot lah! As I can very well argue on this occasion, these products are not only so heavy and cumbersome, they cannot even be practically marketed for their intended purposes. And should instead be reclassified as paper weights.

My point is this, in both case, the metrics or accounting rules to measure what is “good” productivity is really the main issue which should ALWAYS be focused on and not the percentile gains. Why? Because as we can see from the above example, if you don’t look further at how these gains or losses are actually derived at i.e what accounting methodology or formula is used, then you will never be able to fully grasp these finer details. And when you cannot even do that, how can you even begin to trace out the rough outlines of the strengths and weaknesses and begin to tear it to pieces.

I’ve tried to make it as simple as possible. Any simpler and we will all be using cue cards. I hope this provides you with meaningful answers. Thanks gymrat.

Regards

SD (bp liaison officer)

inspir3d, that’s great. In my recollection, it is the first time that I heard that you are working in a consulting firm giving consulting service to the GLC. Due to your experience working with these GLCs, the types of analysis and issues you produce might be valuable in understanding how the GLC performs its financial analysis and what is the main critical analysis and assumption make to justify action (etc price hike, operational cost ).

singaporedaddy. You are right that human has a tendency to optimize towards whatever objective been set forth to him.

Inspir3d & SgDaddy,

If you both agree with Andrew that salary is not going up, yet all these basics are, then how can you possibly make sense of what gahmen is doing? I mean, the gahmen is not stupid right? So I believe when they decide on these hikes they do actually have a strategy and plan. They know if they increase taxes at this time when everyone kena tekan, it will be very unpopular in the long run. So why are they still going ahead with it nonetheless? to me this looks very much like a Kamikaze strategy as public transportation affects so many people. To add to this, electricity is also going up. And recently ERP has gone up as well.

I dont fully understand how they make those calculations, but I know in life people just do not do things for nothing.

g

Exactly g, ppl do not just do things for no reason, the point here which everyone is asking is what is the REASON behind all these increases? Sure the public is frustrated as our garment refused to or do not have any good reasons of doing so other than just pure profiteering intend at the expense of the helpless citizens all these years. All we know was that everytime the garment intend to implement any new policy (which most of them are new tax or price increase), all they do was pass a new law and you ppl just follow, never once did they ever consider the feeling of the local singaporean even when there were few cases of strong public disagreement, they just go ahead with it and don’t even give a damn. What are all these supposed to be? modern time communist party or just legalised loan sharks? at least for loan sharks, we really do have taken the advance, know the consequence and pay the price, but not all these ridiculous implementations, and worse of all during this period of global crises, C’mon! the public are not that stupid as you think, even an idiot can understand and see the whole picture. Give us back all our monies and see what our new generations of singaporean can do for the country. The country belongs to the Singaporeans!!!

80) g on October 10th, 2008 1.15 pm

“to me this looks very much like a Kamikaze strategy as public transportation affects so many people”

“I dont fully understand how they make those calculations, but I know in life people just do not do things for nothing.”

Kamikaze ? Well, you have to wait till 2011. When it comes 2010 or 2011 itself, goodies will start to come out again.

As long as they get > 50%, they will have another five years to engage in this Kamikaze practice on you. How many ‘five-years’ do you think you have to flex your little muscle, provided if the referee does not happily declare a walkover.

Gain > Loss = Net Gain. Hey, I am a old man already. Don’t you think there is a consistent pattern every round and people of my age have come to learn this pattern by heart already.

You are right, “people just do not do things for nothing”. You tell me who gets more of the something and who gets more of the nothing.

Next 5 years? and still get 50% vote? I don’t think so, well unless everything is clean???? you know what I mean . . . politic? anything can happen, they got all ppl monies, and money is power, simple logic.

Yah they can win elections easily using underhand strategies.
Google “gerrymandering” and you’ll know how unfair an election is.

83) tiredsingaporean on October 10th, 2008 3.40 pm

How are you my friend. Hope that you are in good health. I have been enjoying your posts and on that count, we are roughly on the same frequency and I do know what you mean.

I do not usually like sarcasms but I do find that sometimes we need this “linguistic opium” to while away whatever the ‘painful effects’ of this crazy world (go ahead and change it to ‘crazy country’ if you want to).

Yes, you can call it a crazy country. When a ruling party of any country thirst only for wealth and power, the people suffers. Becos, all these things are no difference from sex & alcohol, the more you have them, the more you want them. There is no limit to this kind of things, not until the whole scenerio becomes chaotic and the whole system clashes. The problem with those involved is that they became so engrossed into their $$$ making activities that they do not want to see the problem surfacing or should I say that they just don’t bother at all.

Yes, you can call it crazy country, its just pure madness. So long as there are these bunch of “money & power” thirsty people up there, the citizens suffers. So next coming GE, ask yourself whether you people out there needs another 5 more years of “so called Good Years Ahead”? Think! we all have brains, don’t we?

We have brains and hearts but no money, power and armed forces. They have big brains, small hearts, maybe no heartware and the Armed Forces and Police.

Dare I say, there is no opposition good and big enough to replace our rulers, the Latter can just sit tight and collect their dues for the next two decades. Agree?patriot

Let me put it right here. We have brains and hearts, used to have money but was robbed and left armless. They have big brains but alot of them are still NEW ones, never used before so they can afford to make mistakes so long as they can always say “YES MASTER” it shall be done, so as to keep their obscene flow of $$$mil salaries going.

Greed always have a bad name to it.

Actually, it’s not greed that’s the problem. It’s the lack of integrity in businesses, or lack of professional ethics.

There’s nothing wrong with businesses wanting to earn lots of money. But there’s a problem if they earn it at the expense of other people without giving back. If businesses fail to create value in the society, that’s just greed without integrity.

These are the same businesses that hire people, give people jobs, enable them to have money to buy things for their loved ones. That’s across the whole, from the CEO down to the cleaning lady.

90) Parka on October 12th, 2008 8.53 pm
There’s nothing wrong with businesses wanting to earn lots of money. But there’s a problem if they earn it at the expense of other people without giving back. If businesses fail to create value in the society, that’s just greed without integrity.

I agree with what you just said that there’s nothing wrong with biz wanting to earn lots of money but not at the expense of the local citizens. Evertime something goes wrong or money lost due to mistakes from the top, they just implement or increase more taxes to recover it from the citizens. And if they do make money then they start to adjust their salaries upward and proclaimed themselves as world class leaders. Its a shameful thing to promote our country as a world class nation whereby the citizens are suffering through the hands of these self-proclaimed leaders, even beasts still have hearts to take care of their siblings.

Most of the so call citizen representatives are majority share holders to the stated listed companies. They are getting huge dividend pay-out. This is why there is no control of the price hike over and over again, they are just part of the profiteering team, why cut the extra income?

What makes me really tulan is the price hike affects the livelihood of the commoners where they represents the citizens of Singapore and yet always they only care about their own pocket. Living in District 10 Bt Timah, Holland area posh bungalow with personalized security guards and the facade of representing the commoners and yet when come to price hike by public service companies, they keep quiet. Really quiet……….

“Most of the so call citizen representatives are majority share holders to the stated listed companies. They are getting huge dividend pay-out. This is why there is no control of the price hike over and over again, they are just part of the profiteering team, why cut the extra income?”

We should link conflict of interest as corruption especially one that devoid of accountability and transparency which result in unjustified price hike and unprecedent escalating cost of living, and using law blatantly to destroy questioning voice and figure.
The gahmen hardly talk about conflict of interest which kind of strange to me.

Every gahman seem to close one eyes as achieved stated profit is one of their prominent KPIs for reward.
Needless to say, it is much easier to screw the citizen than a GLC company after all the gov think that “Like it or not”, the citizen in more than 4 decades of brainwashing don’t dare to anything drastic.

why most of garmen bodies increase prices????? It very simple ..the garmen do not want to use their own money or $ in their coffer to help the poor.as the knw of the inpending economic hardship.so they increase now.later,they will said they contribute or give or watever la to help all people affected,in fact and in the end ..in fact It all our $$$ .