Former Singapore Armed Forces (SAF) officers train their sights on solving SMRT's rail woes

When people lose their faith in management direction of entities linked to Singapore's investment arm, Temasek Holdings, the price erosion that follows is often the best-case scenario.

For entities like SMRT Corporation, Singapore's largest train and bus operator, the blast radius resulting from a loss of faith extends far beyond a drop in SMRT's stock market fortunes.

SMRT stakeholders include commuters who get around using its mass rapid transit rail system and bus routes, the government regulator as well as political appointees tasked with regulating Singapore's transport network. A loss of faith among commuters could come back to haunt the Establishment when people mull over the government's track record in assorted lifestyle areas and decide whether or not they deserve that "X" in the box.

This is why SMRT is a vehicle which is too large to fail.

A two-front war
For the handful of former Singapore Armed Forces (SAF) who have or will soon step aboard SMRT, the battle to stabilise the company will be one of the most challenging and high-profile tussles they have ever waged.

Leading the charge is former Chief of Defence Force Lieutenant-General Desmond Kuek who has or will soon be joined by at least four former SAF officers.

Interestingly, the SAF Armour Formation's footprint in SMRT will grow substantially from 2013.

Senior among the ranks is SMRT's CEO himself (ex-54th Singapore Armoured Brigade, ex-4 SAB, ex-41st Battalion Singapore Armoured Regiment). He will be joined by Colonel Gerard Koh (ex-46 SAR) and Lieutenant-Colonel Tan Kian Heong (ex-4 SAB, ex-441 SAR), both of whom are from the SAF Armour alumni. Indeed, half of the four new hires come from the Armour Family, giving the Singapore Army's arm of decision an overwhelming presence in SMRT compared to other combat and combat support arms. (Purists would also count former SMRT Senior Vice-President Communications & Services, Colonel Goh Chee Kong (ex-8 SAB) as part of Armour's contribution to SMRT. COL Goh has since left the company.)

As SMRT's revamped management grapple with the complexities of rolling stock and train ops, heartware issues with SMRT staff and commuters who have had to bear the brunt of service disruptions will make this a two-front war where satisfying one side may come at a cost of sacrificing the other.

Swift and decisive management intervention will earn the SAF oodles of goodwill and respect from market watchers who are convinced militarymen can serve meaningful careers in civvie street.

The average commuter probably couldn't give a hoot who is in charge so long as their buses and trains run on time and fares stay reasonable.

As for SMRT's shareholders, they are likely to watch the state of play closely. Having tasted years of healthy dividends under the previous management, any deviation from this course could draw incoming fire during the next annual general meeting with shareholders.

Sceptical audience
The new management's battle for investors' confidence may be complicated by the sceptical yet influential audience that awaits them among market watchers. Such scepticism stems from years of experience watching certain Temasek-linked counters tank despite management statements that sought to calm or reassure the market.

It is important to remember that a good dozen or so research heads and fund managers who started their respective careers in the late 1990s have lived through the 1997 Asian Financial Crisis, 2000 Dotcom bubble, 9/11 attack in 2001, SARS crisis in 2003 and the 2008 sub prime crisis.

Having witnessed the negative impact of various recessions on TLC's share value, these market movers, who are mostly in their late 30s and 40s, are understandably wary of management who try to charm market watchers. They have heard it all before and will not be an easy crowd to win over with platitudes.

Industry veterans would recall how counters like Chartered Semiconductor and ST Assembly Test Services never quite recovered from value erosion after the tech bubble burst despite their Temasek parentage. Promises of a turnaround never materialised and many of these then-young industry watchers had a tough time explaining to their clients how these one-time market darlings became stock market rejects.

"Shareholders would hold on to the safety of such transport utility companies as they have a guaranteed market (the riders), a built-in inflation proof-pricing mechanism which allows them to give off good cashflow ( since projects are well-funded) and be operationally sound. If they can give decent dividends (approx 3% ) SMRT just has to ride this out. In 6 months time it will be forgotten," said one industry player who had his baptism of fire during the Asian Financial Crisis.

"SMRT does not require “new” sources of capital from the public. Nor do people have an alternative. In fact when theres no news on SMRT I think that’s probably when thigns are running well!"

It will take more than the usual public relations charm offensive to convince industry sceptics that SMRT is on track to better times.

Indeed, with new management blood, everyone recogises the TLC is at a turning point: they are just understandably wary as turning points can swing both ways.