SMRT at S$1.735, to enter or exit?

I wonder how many shareholders of public companies in the world share a similar experience as us owners of SMRT? The experience of enjoying - or enduring - the CAPEX injection of S$1.1 billion for 550 buses into the transport systems. The aim of the government injection is to coax - or force - the transport companies to service relatively unprofitable routes. LTA plans the bus routes via central bus network planners.

• Would LTA plan for SMRT proftiability or for the public? 
• Wouldn't this lead to SMRT running routes that erodes overall proftiability? 

SMRT lacks pricing power as transport fares are determined by the Public Transport Council. 2011's fare increase was much lower than SMRT's desired 2.8%. This inability to control their price, the amount of profit margin makes this business less attractive.

In 2009, SMRT and Comfortdelgro did not just forego their fare increase, they decresed their fares by 4.6%. This decrease wiped out the annual fare increase from the previous 3 years (2006 to 2008). This is a long history of SMRT's inability to set their price (hence less attractive an investment).

I can only see 2 options for improved profitability to negate their weak pricing power:

1. To covert even more operational space into retail space and this was implemented successfully by the previous CEO from a retail background. However, the tenants attracted seem to be from a much lower tier as compared to the tenants attracted by REITs near to the stations. There's hardly a shopping experience at the few SMRT X-changes I've observed. 
2. To lower operational costs however it had proven unacceptable with the visible dips in quality and operational reliablity. SMRT's core business is still the provision of rail services in Singapore. Failure to adhere to service standards will only draw more scrutiny and further disruptive meddling by the government. 

There seems to be a lot of vacancies at SMRT this week, if you check their career section, there are gaps from the operator to senior management level. Employee turnover is a systemic issue that cannot be ignored for any company. Hiring and training new employees lowers productivity and increases costs of operations.

Last year I discovered that SMRT did not hedge against upward fluctuations in diesel price but ComfortDelgro did. In subsequent months, SMRT reported lower profitability due to increases in diesel price. That flipped an alarm bell - why wasn't management to managing this business risk?

Lack of capability?

Nonchalance?

Flippant?

SMRT is trading at 19+ PE. It is very high for a business that is quite weak in several areas.

So what if SMRT enjoys a captive market? A company that can't set prices nor control operational costs seems like a bad investment - for now.

I bought in at S$1.96. Bad decision... I didn't understand the transport sector well enough. Not waiting for the COI investigations to be completed, I sold off at S$1.74 last week. I think the investigations will lead to more profit dampening measures.

Without a supportive customer base, additional fare 'negotiations' between the public, the PTC and SMRT will be politically difficult. And the additional rail lines will probably grow operating costs without tandem improvements in revenue.

Not going to wait around and collect dividends to fill a hole caused by capital loss. At 1.74, I've already made 200+ losses per lot. If I wait, I'd need 2.5 years to cover back my losses! I'm cutting losses and going elsewhere.