SMRT was considered a good piece of blue-chip stock. Its rail business is profitable, and its media and real estate are doing pretty decently too. It is no surprise why so many are upset when it was announced to be privatised (reference). Then a friend did ask me "Isn't SMRT already private?"
I did not buy the stock despite its assumingly delicious and stable dividends payout for two reasons.
Firstly, its book value is only about $0.60. The stock price when I last checked was about $1.80-$1.90. SMRT EPS stands at abt $0.07 a share. Operating profit is about 10%. It made no sense to me paying a 300% premium for something like that.
Secondly, I roughly understand how this kind of things work. Being public-listed means it had to be profit driven. I believe that public transport should do public good. Being profit-driven normally means that this basic function is compromised, whether privatising will really make it efficient or not. It will be nice to have the best of both worlds though.
Since fares are regulated, SMRT cannot raise fares prices as much as they wish, which is the easiest way to be profitable. So they have to be lean, and most corporations approach that by coming out with cost-cutting measurement.
Cost-cutting is good, except when times when essential functions are cut because they are not generating profits. Nobody would actually see the downstream problems, while the "hero" who recommended the cost-cutting measure was exalted for his/her "forward-looking" and "outstanding" leadership. Then we know what happened later.
Of course there are many other issues that I do not understand, such as the rail infrastructure being publicly funded but the profits are disbursed back to the public (and reliability suffered).
In short I just find it "unethical" (unethical is a strong word, but my vocabulary is lacking) to buy stocks like this. I was called "silly" but I am glad I stood firm to my beliefs.
It's silly I know. There are many who would grab money at any opportunity. I am just happy being the "silly" few.
