Is monopoly a good business?

Recently, follow the transport policy change, the spotlight are on ComfortDelgro and SMRT. Both of the companies have a duopoly on the local transport market. They are natural monopoly who operate certain concession and have stable business.

Generally, this type of business is defensive in nature. That means during good time or bad time, the earning is quite stable. Depends on the industry nature, some monopoly might have better prospect than others. Compare a toll road operator to a bus company, I would think that toll road is better, at least the fixed cost does not increase so fast. Well, but it all depends on individual situation. Look at the local market which is pretty small, obviously the monopoly has little room for growth.

That's why I was never impressed with the transport stock. The room for growth is limited. Key risk to monopoly is always the regulation change. Unfortunately, this is what is going to happen to them in the coming years.

More competition would always cause falling margin and reduced profit. Only the more efficient operator would survive.