What to Do When Your Bus Fare Increases

In recent news, the Public Transport Council in Singapore had announced a range of fare hikes for public bus and train services.

The current hike would see fares increase by around 3.2 per cent across the board with another estimated 3.1 per cent increase coming in the future. So after the revelation last April that inflation has not spared even Singaporeans’ favoured hawker foods like fishball noodles, chicken rice, and roti prata, we now see inflation rearing its somewhat unwelcome head in our transport fares.

But the thing is, something had to give. SMRT Corporation (SGX: S53) and SBS Transit (SGX: S61), operators of public bus and train services here in Singapore, have seen an appalling shift in profit margins over the past few years due to rising costs (think labour and fuel).

SMRT Corporation

SBS Transit

Net Income Margin in 2010*



Net Income Margin in last 12 months



*For SMRT, the period of 2010 refers to the financial year ended 31 March 2011

Source: S&P Capital IQ

These two companies do not have full control over the prices they charge for the services they provide due to governmental restrictions and the authorities’ move to allow some price revisions would help ease some pressure on them going forward.

So while commuters would likely not welcome these fare hikes (it’s hard to imagine commuters cheering the decision to make them pay more), there are indeed two sides to the story.

Either way, the recent fare increases highlight a pertinent and important issue: if daily goods and services are becoming pricier with the passage of time, how can someone protect the purchasing power of his capital?

The key, besides saving more, is to grow your capital. And the stock market here in Singapore is one such avenue to do that.

For instance, the SPDR Straits Times Index ETF (SGX: ES3), an exchange traded fund that tracks the stock market barometer the Straits Times Index (SGX: ^STI), has given returns of 5.27% annually from 11 Apr 2002 to 30 Nov 2013.

Factor in reinvested dividends, and the fund’s returns jump to 8.45% per year over the past 11-plus years. Every S$1,000 invested into the fund on 11 Apr 2002 would have become S$2,542 by 30 Nov 2013 assuming dividends are reinvested. That’s more than a double and surely beats any bank deposits you can find hands down.

Individual shares can also provide steady or even growing pay-checks through the years through dividends. The conglomerate Jardine Cycle & Carriage (SGX: C07) and property investment and Malay fashion apparel retailer Second Chance Properties (SGX: 528) are just two such examples of companies with a solid history of growing dividends.

Both shares – Jardine C&C and Second Chance Properties – also carry high historical dividend yields of 3.9% and 8% respectively based on their current share prices of S$39.20 and S$0.44.

My colleague David Kuo recently wrote that “[inflation] could last a very long time indeed.” If that really is true, then everyone should be thinking hard about protecting and growing their capital.

The shares I’ve mentioned aren’t necessarily shoo-ins for a great investment. To find shares with a reasonably good chance of being able to build lasting long-term wealth for us, there are several important factors at play. The price we pay for the share; the strength of its balance sheet; the presence or absence of any lasting competitive advantages in its businesses; the durability of its cash flows and profits against the passage of time; all these are things we need to think hard about.

Some might find that unpalatable-work (even though it’s certainly fun for me and my colleagues here at The Motley Fool!). But in an era where even the price of fishball noodles and bus fares are likely rising faster than our wages can follow, investing wisely might just be the thing we need to do.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Second Chance Properties.