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SMRT - Maybank Kim Eng 2016-04-29: Range-bound in Absence of Transition

SMRT - Maybank Kim Eng 2016-04-29: Range-bound in Absence of Transition SMRT CORPORATION LTD S53.SI 

SMRT (MRT SP) Range-bound in Absence of Transition 


Below; maintain HOLD on lack of transition details 

  • Core 4Q16 was below, with FY16 EPS at 77% of our FY16F. 
  • As the market awaits details of an impending bus and rail transition, we expect the stock to stay range-bound. 
  • Maintain HOLD and SGD1.40 TP, at 20x FY3/17 EPS, +1SD above long-term average. 
  • Stock yields 2.7%. 

Fare cuts & DTL 2 impact 

  • Headline net income of SGD26.6m was inflated by a net property tax refund of SGD17.1m for rail. 
  • 4Q rail core losses were SGD8.5m, a reversal from 3Q16 profits of SGD8.2m. This could be traced to a steep increase in maintenance expenses of SGD87m at 53% of revenue, up from a quarterly average of SGD75m in the past year. 
  • Management guides that such expenses will stay within 45-50% of revenue. 
  • Buses also lost SGD1.6m. Both operations were buffeted by a 1.9% drop in fares and traffic cannibalisation from SBST’s newly-opened Downtown Line Stage 2. 
  • We expect more rail losses in FY17, though bus could potentially return to profitability when its new operating model kicks in from Sep 2016. 
  • Full-year DPS has been raised to 4.0 SGD cts from FY15’s 3.25 cts. 

Elevated capex in absence of transition 

  • Management guides for non-rail CAPEX of SGD250m in FY17E. 
  • SMRT continues to engage the regulator on the industry’s transition to a sustainable operating model, without furnishing further details. 
  • We believe it will continue to burn cash on rail upgrades for at least another 2-3 years without a rail transition. 
  • Responding to evolving taxi market Not much impact has been felt from new taxi entrants. 
  • SMRT still had a healthy taxi hire-out rate of 96.5% in FY16. But in anticipation of competition, it recently rolled out Stride, a private-hire car business to provide alternatives to commuters and drivers. 



Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-04-29
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 1.40 Same 1.40


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