SBS Transit - Ticket Price Adjustment?!

Yesterday PTC said that it will implement the maximum allowable adjustment quantum of 4.3% for bus and train fares starting from December 29. Even though the adjustment for students and senior citizens will be capped at 1 cent, for most of the people who are using adult transport card the adjustment will 6 cents per journey.

I looked into their 1H report, I realised that while the 1H revenue increased by 17.8%, their total operating cost increased by 16% only. If we look into the details, we can see that repairs and maintenance costs increased by 30.3% and fuel and electricity costs increased by 35.4%. However, the biggest component of the total operating cost is staff costs, which account for more than 50% of the total operating cost, increased by 11.4% only.

I also noted that the finance costs decreased by 16.9%, and their total liability decreased by 6.6%. There are not many changes in terms of borrowings. The cash position was also healthy and the company got positive operating cash inflow for 1H 2018.

I don't really understand the reason behind the bus and train fares adjustment. It doesn't seem like the company is doing badly and need to increase their revenue to cover their interest expenses or daily operating expenses. The company got healthy cash flow with good cash position, and their biggest portion of operating expense increased at a slower pace compared with the revenue. So in conclusion, the fare adjustment will increase the company's profit before taxation, perhaps by another 60%. I took the revenue from 1H 2018 and multiplied by 1.043 to get the revenue with fares adjustment. Assumed that the revenue and the total operating expenses didn't increase (or perhaps they will increase by a similar speed), so the profit before taxation will be increased by around 60%.

If we view this adjustment solely on an investor's perspective, I guess this fare adjustment is a good news for SBS Transit's investors. The cash flow will be much healthier and I believe they will be able to distribute a higher dividend.

Will... Perhaps I shall buy some SBS Transit to hedge my transportation expenses...

DYODD.. I can feel the pain of my wallet ):