During the “circuit breaker” last year, the public transport sector took a huge hit from the plunge in ridership. Now, even with Phase Three of reopening of the Singapore economy, ridership is still low as work-from-home (WFH) arrangements have slashed the need to commute. Furthermore, with a 10.30pm no-more-alcohol ban strictly enforced, the nightlife scene remains gloomy, dampening the demand for taxis.
This phenomenon is not just prevalent in Singapore. Israeli mobility app provider Moovit has found that 40% of people globally has cut back on public transport rides, with 8.5% completely avoiding public transport since the Covid-19 pandemic started.
At the lowest point in 2020, many cities around the world experienced more than an 80% drop in public transport ridership. “It’s an understatement to say that with many residents working from home, avoiding mass transit, and vast changes in local transit services, the way people travel within their cities has changed,” the report, titled 2020 Global Public Transport Report, notes.
The survey also reveals that Singaporeans’ aversion to public transport was less severe compared to other cities. More than half of the respondents did not change their travelling habits on public transport since the outbreak, while 8.2% said that their trips had actually increased during the period. Less than 2% of those polled said they were still staying away from buses and trains, while more than 30% were using them less frequently.
Only 1.4% of respondents were found to have switched to other modes of transport. But this could be due to some modes of transport, such as travelling by taxi or driving one’s own car, being significantly more expensive than taking public transport. Furthermore, Singapore’s public transport system has been known to be easily accessible.
Road to recovery
Nevertheless, the public transport sector is on the right track for a recovery, albeit at a measured pace. Further indications will be available when SBS Transit reports its full-year numbers on Feb 9 and ComfortDelGro (CDG) on Feb 15.
According to Maybank Kim Eng analyst Kareen Chan, a sequential recovery in rail ridership in 2021 is expected due to further easing of safe-distancing and WFH measures, and as vaccines become more freely available. As for taxis, riderships saw the fastest pace of rebound in 3Q2020 as riders prefer taxis and private-hire cars to reduce social interaction.
“The momentum should continue to gather steam, and alternative data (the number of taxis at taxi stands during peak hours) suggests that taxi idling rate has decreased about 90% in the past three months. Anecdotally, our conversations with taxis and Grab drivers also suggest that situation has improved vastly. Drivers have started choosing their calls and routes to maximise income,” notes Chan.
To that end, Maybank Kim Eng has a “buy” recommendation on CDG with a target price of $1.88, as Chan believes that the group is in a favourable position to ride the recovery in taxi and public transport. This target price, revised upwards from $1.76 on Jan 11, was reiterated on Feb 3 by Chan.
Chan opines that the stock price recovery could be in stages, catalysed by easing of WFH measures; Covid-19 situation in the UK being under control; and return of tourists when air travel resumes. “Covid19 has made inflection points hard to predict, but CDG offers value as the worst is over and long-term fundamentals are intact,” she adds.
RHB Group Research is also positive on the stock as it has maintained its “buy” call on CDG with a target price of $1.90. Analyst Shekhar Jaiswal says: “We believe sequential improvement in its Singapore earnings, as witnessed in 3QFY2020, could continue.”
Jaiswal expects ridership for the group’s rail business to continue improving month-on-month over the next few quarters, while its bus operating frequencies are expected to revert to pre-Covid-19 levels as Singapore eases more restrictions.
Year-to-date, shares in CDG traded 4.8% lower at $1.59 as at Feb 2.
Meanwhile, Maybank’s Chan, as well as CGS-CIMB analysts Ong Khang Chuen and Darren Ong, expect rail ridership to return to about 75% of pre-Covid levels in 2021. As it is, SBS Transit, CDG’s 75%-owned local bus operator, announced that it has reached 65% of pre-Covid levels in rail ridership as at November 2020.
RHB has an “add” call on SBS Transit with a target price of $3.60 and favours it over CDG. “As the bulk receiver of government reliefs, SBS could see better earnings protection from Covid-19 impact compared to CDG in 2020, in our view,” says RHB.
The lower passenger numbers of Covid-19 did not stop the transport operators from looking further ahead. Singapore’s two largest bus operators, SMRT and SBS Transit, along with ST Engineering, have introduced driverless buses in two areas of Singapore — Haw Par Villa and Jurong Island. ST Engineering looks into the development of the autonomous vehicle technology. Of course, it remains to be seen what kind of earnings contribution driverless buses can make to the companies’ bottom line, if at all.
Singapore first started experimenting with autonomous vehicles in 2015 and allowing passengers to ride for free during the free trial period. On Jan 26, it was announced that the new services will be available for a small fee, starting from just 40 cents. This is the first time that driverless bus service operators in Singapore have collected fares from passengers and generated revenue.
The paid trial will continue until April 30 and provide data on what is needed for these autonomous buses to be rolled out commercially in Singapore and overseas. Companies in the region are already expressing interest in the buses’ viability in their countries, says Vincent Chong, group president and CEO of ST Engineering.
“We are living in a time where data is more important than ever before,” says Yovav Meydad, Moovit’s chief growth and marketing officer. “Especially in the public transportation industry, big data can help cities and transit agencies gain insights into what riders need in order to increase mass transit use.”
Cruise control
As the public transport sector is showing signs of recovery, so is the private transport sector. In December 2020, private transport costs turned to a positive 1.2% compared to –1.3% in November, rising for the first time since February 2020, due to increasing car prices. Car prices in December increased by 6.1% m-o-m, compared to a rise of 2.6% m-o-m in November.
On the back of that, average COE premiums in the open category have climbed to the highest level since May 2019 and have now reached an all-time high for categories A, B, C and D.
“We expect private transport costs to continue rising in the first half of 2021 as quotas fall, while demand for cars will be sustained by the preference for private transport,” says Maybank Kim Eng, while noting that monthly COE quota for February to April 2021 was reduced to 5,800 in January 2021, from 6,600 in November 2020.
The total number of cars on the roads has been increasing steadily since 2016, with end-December recording some 636,180 cars in Singapore, according to data from the Land Transport Authority.
Thanks to the higher private transport costs, Singapore’s headline inflation in December saw a slight m-o-m increase from –0.1% to 0%.
Meanwhile, regional car dealership operator Jardine Cycle & Carriage (JC&C) announced in a business update that its 9MFY2020 ended September saw negative impact from the Covid-19 pandemic. “Trading conditions were challenging, as both business and consumer sentiment were affected by the pandemic and the measures taken to control it. The group’s performance continues to be affected by these conditions, although there was some improvement in a number of the group’s businesses in the third quarter compared to the second quarter,” it notes.
In Singapore, JC&C, part of the Hong Kong-based Jardine conglomerate, distributes brands ranging from Citroën to Mitsubishi to Kia and most notably, premium German marquee Mercedes-Benz. It has a much heftier presence in Indonesia via its 50.1% stake in Astra, which distributes not just cars but also mining machineries.
On the back of the pandemic, JC&C announced that its direct motor interests were impacted. In Singapore, Cycle & Carriage saw a resumption in sales activities, but year-to-date performance was down compared to the previous year. In Malaysia, Cycle & Carriage Bintang reported a lower nine-month sales volume compared to 2019, despite higher unit sales in the third quarter following a government sales tax exemption.
But could JC&C drive towards a recovery this year as the group brings in more electric vehicles and Singapore phases out petrol and diesel vehicles?
At the Budget 2020 presentation, Deputy Prime Minister Heng Swee Keat announced that Singapore will be phasing out internal combustion engine (ICE) vehicles within the next 20 years, as part of the Land Transport Master Plan 2040. With that, electric vehicles (EVs) are made to be “more attractive” from this year.
Already, taxi companies, car rental companies and private hire car booking providers in Singapore have committed to having 100% cleaner vehicles by 2040.
Apart from being able to enjoy the Vehicular Emissions Scheme and lower road taxes, from 2021, those who purchase an EV will be offered a 45% rebate on the car’s additional registration fee, capped at $20,000 per vehicle. This early adoption incentive scheme will be available from 2021 to 2023.
“Our vision is to phase out ICE and have vehicles run on cleaner energy by 2040,” said Heng, citing public health and climate change reasons for this master plan.
At this juncture, analysts are positive on the stock. HSBC and Goldman Sachs have “buy” ratings on JC&C, while Macquarie views the stock as “outperform”.
As at Feb 2, shares in JC&C are trading 9.4% higher year-to-date at $21.53, giving it a P/E ratio of 8.38 times and a dividend yield of 5.08%.
