Bus and rail operator SBS Transit posted net profit of S$1.53 million ($887,000) for the September quarter on Monday, against S$19.79 million in the same period a year earlier, partly because rail revenues on a new subway line failed to offset costs.

The Singapore government said last month high operating costs no longer made it feasible for the tiny city state to have both operators, SBS Transit Ltd and SMRT Corp running train services.

Transport minister Yeo Cheow Tong said the government was open to the two companies either merging their train operations or transferring one line to the other.

SBS Transit, majority-owned by ComfortDelgro Corp Ltd, started operating the new North East line -- built by the government at a cost of S$4.6 billion ($2.7 billion) -- in June this year.

ComfortDelgro is 18.5 percent owned by the Singapore Labour Foundation, a statutory board of the Ministry of Manpower.

Rival SMRT Corp, which used to be Singapore's sole rail operator and is 62 percent government-owned, also runs buses through its unit TIBS.

Analysts said the hefty start up losses at the new North East rail line, estimated at around S$25 million this year, could see SBS consider a merger or an asset swap with SMRT.

"They may want to go for an asset swap as a preferred option. That would be more clean cut," said Ong Seng Yeow, analyst at Kim Eng Ong Asia Securities.

This would allow SBS Transit to focus on its core bus operations, and return SMRT Corp to its role as the city state's sole rail system operator, he said.

Officials from both transport companies were not immediately available for comment.

But SMRT chief executive Saw Phaik Hwa had said any takeover of the new rail line would boil down to terms.

Singapore, with a population of just over four million is about half the size of Los Angeles county in the United States. The city state has a subway system running to all parts of the island and is building a circle line to link them.

Chong Wee Lee, analyst at Phillip Research, said SMRT was also likely to incur losses from the new subway line for the first few years, but needed the service as a new source of revenue for the future.

"From a long-term perspective, SMRT would want to take over NEL (North-East) line," he said. "Besides the upcoming Circle Line, they have no other new generator of revenues and little extensive overseas operations."

SBS shares were down 2.4 percent at S$1.24 by the midday break on Tuesday. The stock has fallen 6.8 percent since the start of the year against a 26 percent rise in the key Straits Times index over the same period.

SMRT shares were down half a cent at S$0.575 by the midday break, around the same level since the start of the year.

($1-1.725 Singapore Dollar)