• Thu
  • Aug 21, 2014
  • Updated: 2:48pm
Business
TRANSPORT

Profit dip could raise MTR fares in Hong Kong

Commuters may face yet another rise if train operator's first drop in net earnings in three years leads to increase under new profit-linked adjustment mechanism

PUBLISHED : Tuesday, 14 August, 2012, 12:00am
UPDATED : Tuesday, 14 August, 2012, 7:51pm

The MTR Corporation posted its first drop in net profit in three years ahead of a review of the corporation's fare adjustment mechanism which may take its profitability into account in any future fare increases.

The city's train operator has been allowed to raise fares for each of the past three years due to inflation but the rises have sparked public dissent.

Lawmakers are now concerned the drop in MTR's earnings may be another reason to raise fares again next year. They have urged the government to come up with a proposal soon to give the public enough time to study the new mechanism.

Lower property sale proceeds and a re-evaluation of property values squeezed MTR's net profit by 33.2 per cent to HK$5.86 million for the first half of the year. Excluding the re-evaluation, underlying profit still fell 5.7 per cent to HK$4.12 billion.

MTR chief executive Jay Walder said the corporation still hasn't started talks with the government over fares and a proposal is only expected to come out early next year.

Democratic Party lawmaker Wong Sing-chi said the MTR had raised fares in each of the past three years under the existing mechanism despite making big profits. "That is why we want to add profitability and public's affordability into the formula," Wong said.

In 2007, the government decided to use the composite consumer price index and transport workers' wages as major factors in determining if the MTR should be allowed a fare rise. However, Hong Kong then entered an inflationary period and the transport operator was allowed to raise fares to cope with that.

The government said earlier it aimed to have a proposal on the fare formula by the end of this year, but the failure of new chief executive Leung Chun-ying to push ahead with a restructuring of the administration has delayed progress on some policies.

Financial analysts said the corporation's full-year earnings could be lower than last year as it may not be able to book profit from its pre-sale of the Riverpark development at Che Kung Temple station in Sha Tin in time for inclusion in its results for the second half of the year. Still, they believe the MTR's fundamentals remain very strong.

"Fluctuation in property prices and booking of the proceeds may give the swing to MTR's results," said Kenny Tang Sing-hing, an analyst who tracks the corporation. "But revenue growth remains strong for its core businesses in rail, commercial rental, property management and station advertising, and it is fast expanding its overseas business."

Its earnings before interest, taxes and depreciation jumped 8.6 per cent year-on-year to HK$6.52 billion during the first six months, while its operational profit margin edged up 0.9 percentage points to 38 per cent. Passenger trips increased 4.5 per cent to 850 million during the period.

The corporation's property director, David Tang, said it planned to retender for sale a site for residential development in Tai Wai in the next six months, after bids last year failed to meet expectations. It may also tender three sites in Tin Shui Wai and Long Ping in the next six months.

The MTR has also bid for a 47-kilometre metro line in Beijing, and was short-listed by UK's Department of Transport to bid for two rail operating franchises.

Share

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive
 
 

 

 
 
 
 
 

Login

SCMP.com Account

or