Use $1.1 billion bus package to buy back SBS

Dear Mr Tharman,

I refer to paragraph 109 of your Budget 2012 round up speech [1] on the $1.1 billion government package to buy and operate 550 new buses.

A check on the SGX website on 17 Mar 2012 showed that SBS shares last transacted at $1.71. Since there are currently 308,629,766 SBS shares issued [2], the current SBS market capitalisation stands at $528 million. The $820 million to be used to cover operating costs of the 550 new buses over the next 10 years [1] is more than enough to buy back all SBS shares. This will be made easier considering that the government indirectly owns 18.4% of SBS shares [3]. The shares that needs to be bought back amount to 81.6% of $528 million = $431 million. By spending $431 million, the government will be able to buy back SBS entirely with $389 million to spare.

The government intends to spend $82 million a year over the next ten years to cover operating costs of the 550 new buses. After buying back SBS, the government can only spare $38.9 million a year over the next ten years. There is thus a shortfall of $43.1 million a year over the next ten years. But SBS has been making an average profit of $46 million a year since 2003 [4]. SBS Transit’s yearly profits will thus be more than sufficient to cover the shortfall. In so doing, the government will be able to buy back SBS entirely without having to spend a single cent more than it currently plans to.

[1] BUDGET 2012 DEBATE ROUND-UP SPEECH BY DEPUTY PRIME MINISTER AND MINISTER FOR FINANCE, MR THARMAN SHANMUGARATNAM ON 1 MARCH 2012, page 15, paragraph 109

109. The $1.1 billion package is expected to cover the losses on the 550 buses – in other words, the additional costs net of revenues. Of the $1.1 billion package, $280 million is budgeted for the purchase of the 550 buses over the next five years, and $820 million to cover the net operating costs over the 10 years. This is based on the best estimates currently. However, we will be monitoring and scrutinising the PTOs? actual costs for both the purchase and running of the buses. Should their losses turn out to be lower than expected, the Government funding will be reduced correspondingly. So one way or another, there are no profits to be made from the 550 buses.

[2] SBS Transit Full Year Financial Statements for Year ended 31 Dec 2011, page 4, item 7

As at 31 December 2011, the total number of issued shares was 308,629,766 (31 December 2010: 308,106,016).

[3] Analysing shareholdings in SBS Transit

Since Comfort Delgro and DBS Nominees own SBS Transit shares, we need to analyse their shareholdings as well.

Shareholdings in SBS Transit No. shares %
Comfort Delgro Corporation Limited 231,680,012 75.1%
BNP Paribas Securities Services Singapore 14,044,000 4.6%
DBS Nominees Pte Ltd 5,096,200 1.7%


Shareholdings in Comfort Delgro No. shares %
DBS Nominees 421,736,382 20.2%
Citibank Nomenees Singapore Ptd Ltd 308,495,870 14.8%
Singapore Labour Foundation 252,616,594 12.1%
DBSN Services Pte Ltd 226,382,923 10.8%

DBS Group Holdings wholly owns DBS Bank which in turn wholly owns DBS Nominees Pte Ltd, DBSN Services Pte Ltd, DB Nominees (S) Pte Ltd and DBS Vickers Securities (S) Pte Ltd. To resolve the circular ownership involving DBS Group Holdings and its subsidiaries, we allocate DBS subsidiaries’ shareholding in DBS Group to the other non-subsidiary shareholders of DBS Group.

Shareholdings in DBS Group Holdings No. shares % Adjusted %
Citibank Nominees Singapore Pte Ltd 440,943,672 19.1% 26.1%
DBS Nominees Pte Ltd 369,754,143 16.0%
Maju Holdings Pte Ltd 351,745,560 15.2% 20.8%
Temasek Holdings (Pte) Ltd 278,510,692 12.1% 16.5%
DBSN Services Pte Ltd 226,712,057 9.8%
HSBC (Singapore) Nominees Pte Ltd 151,803,972 6.6% 9.0%
United Overseas Bank Nominees Pte Ltd 67,257,494 2.9% 4.0%
Raffl es Nominees (Pte) Ltd 42,083,138 1.8% 2.5%
DB Nominees (S) Pte Ltd 16,636,028 0.7%
Lee Pineapple Company Pte Ltd 12,900,000 0.6% 0.8%
Merrill Lynch (Singapore) Pte Ltd 10,804,560 0.5% 0.6%
BNP Paribas Securities Services Singapore Branch 10,174,815 0.4% 0.6%
Lee Foundation 9,122,187 0.4% 0.5%
BNP Paribas Nominees Singapore Pte Ltd 6,584,665 0.3% 0.4%
DBS Vickers Securities (S) Pte Ltd 5,974,249 0.3%

With that adjustment, Maju Holdings effectively owns 20.8% of DBS Holdings instead of 15.2%. Temasek Holdings effectively owns 16.5% of DBS Holdings instead of 12.1%.

Thus,

  • Singapore Labour Foundation shareholding of SBS shares = 12.1% of 231,680,012 = 28,010,113 shares
  • Maju Holdings shareholding of SBS shares = 20.8% of (20.2% + 10.8%) of 231,680,012 + 20.8% of 5,096,200 = 16,010,368 shares
  • Temasek Holdings shareholding of SBS shares = 16.5% of (20.2% + 10.8%) of 231,680,012 + 16.5% of 5,096,200 = 12,677,941 shares
  • Total government shareholding of SBS shares = 18.4%
  • Shareholdings in SBS Transit (indirect) No. shares %
    Singapore Labour Foundation 28,010,113 9.1%
    Maju Holdings Pte Ltd 16,010,368 5.2%
    Temasek Holdings (Pte) Ltd 12,677,941 4.1%
    Total 56,698,422 18.4%

    NB: Singapore Labour Foundation is a statutory board of Ministry of Manpower (http://www.slf.gov.sg/SLF.html?1). Maju Holdings is wholly owned by Temasek Holdings which in turn is wholly owned by Ministry of Finance.

    [4] SBS Transit profit attributable to shareholders from 2003 to 2011 obtained from SBS Transit annual reports

    Year Profits ($’000)
    2011 36,676
    2010 54,278
    2009 54,612
    2008 40,580
    2007 50,022
    2006 56,133
    2005 51,536
    2004 49,041
    2003 19,015
    Average 45,780
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