馃殙 NATIONAL SECURITY: RAILWAY INDUSTRY 馃殙
Railway industry is a strategic sector more or less similar than airports (not airlines). Given that resources are limited, train tracks can only pass through certain (optimal) locations. This situation makes a monopolistic industry where every government would want to intervene.
Although the popularity of the train was overtaken by the efficiency of the aircraft, it could recover importance. Some reasons to think on train could be:
- Apparent benefit to the environment (not cars pollution)
- Less traffic and relief for the rest of public transport
- Regional economic development (by effect of tourism)
Because of this, the railways have been politized. They are political and electoral projects, especially the high-speed trains. The problem is that they are often not profitable enough and are heavily indebted. Currently, there are some State-owned enterprises in this category such as SNCF, RANFE, AMTRAK, CNR, Japan Railways Group and Shinkansen. The other problem is that there is not enough public information about its finances to make any accurate judgement.
However, there are information of other companys which are relevant because they cover other areas of transportation. The graph shows 3 companies mainly focused on freight transport and engineering (Union Pacific, Norfolk Southern and China National Railway), 2 also focused on public transport (Canadian National and Canadian Pacific) and 1 in both areas (China Railway Group).
Of these, the worst indebted are the Chinese. The best returns on invested capital are found in Canada. The best debt management is with the Americans. A priori, the efficient investment is for the freight transport (it will always be in demand and does not require much debt) and low-speed. The major consideration is that the comparison shows low-speed railway undertakings, not high-speed ones. Only the Chinese focus on high-speed.
Perhaps, the big challenge is for high-speed trains. SNCF (Soci茅t茅 Nationale des Chemins de fer Fran莽ais) has also an average ROIC of ± 6% with a Net Debt/EBITDA ratio of ± 3.6x (not showed data in the graph). Although it has better margins than Chinese, it is still a risky business where public spending sustains them. Finally, the passenger train requires high operational elements and the demand for which might not sufficient to offset the costs.
The best analysis is yours!
J. Joel Padilla
https://www.linkedin.com/in/joelpadilla/recent-activity/
https://jjplindex.blogspot.com/
Although the popularity of the train was overtaken by the efficiency of the aircraft, it could recover importance. Some reasons to think on train could be:
- Apparent benefit to the environment (not cars pollution)
- Less traffic and relief for the rest of public transport
- Regional economic development (by effect of tourism)
Because of this, the railways have been politized. They are political and electoral projects, especially the high-speed trains. The problem is that they are often not profitable enough and are heavily indebted. Currently, there are some State-owned enterprises in this category such as SNCF, RANFE, AMTRAK, CNR, Japan Railways Group and Shinkansen. The other problem is that there is not enough public information about its finances to make any accurate judgement.
However, there are information of other companys which are relevant because they cover other areas of transportation. The graph shows 3 companies mainly focused on freight transport and engineering (Union Pacific, Norfolk Southern and China National Railway), 2 also focused on public transport (Canadian National and Canadian Pacific) and 1 in both areas (China Railway Group).
Of these, the worst indebted are the Chinese. The best returns on invested capital are found in Canada. The best debt management is with the Americans. A priori, the efficient investment is for the freight transport (it will always be in demand and does not require much debt) and low-speed. The major consideration is that the comparison shows low-speed railway undertakings, not high-speed ones. Only the Chinese focus on high-speed.
Perhaps, the big challenge is for high-speed trains. SNCF (Soci茅t茅 Nationale des Chemins de fer Fran莽ais) has also an average ROIC of ± 6% with a Net Debt/EBITDA ratio of ± 3.6x (not showed data in the graph). Although it has better margins than Chinese, it is still a risky business where public spending sustains them. Finally, the passenger train requires high operational elements and the demand for which might not sufficient to offset the costs.
The best analysis is yours!
J. Joel Padilla
https://www.linkedin.com/in/joelpadilla/recent-activity/
https://jjplindex.blogspot.com/
Copyright: Joel Padilla 2023
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