SMRT CORPORATION LTD
S53.SI
SMRT Corp Ltd - Rail segment off-track
- Both 4Q and FY16 revenue were in line with both consensus and our expectations.
- 4QFY03/16 PATMI of S$26.6mn beat both consensus expectations of S$17.4mn and our expectations of S$16.9mn.
- FY03/16 PATMI of S$109mn beat both consensus expectations of S$99.7mn and our expectations of S$95.4mn.
- Headline Group FY16 PATMI includes a one-off property tax refund of S$19.0mn.
- 2.5 cents final dividend proposed vs. FY03/15 1.75 cents final dividend.
Adjusted Group PATMI missed consensus and our expectations
- There was a S$19.0mn property tax refund at the Group level (inclusive of S$17.1mn property tax refund from Rail segment).
- After adjusting for the one-off tax refund, Group FY16 PATMI would have been closer to c.S$90mn. Thus missing both consensus and our expectations by c.10% and c.6% respectively.
Rail operations worsened; FY16 core-operating loss of S$9.6mn
- The Rail Business reported an operating profit of S$7.4mn for FY16. However, this was boosted by a one-off net property tax refund of S$17.1mn. Adjusting for this one-off gain, FY16 Rail Business actually suffered an operating loss of S$9.6mn, compared to an operating profit of S$9.6mn in FY15.
Overall Rail business, inclusive of Rental and Advertising, is probably still profitable
- FY16 Rental and Advertising revenue derived from the Rail network was c.S$106mn and c.S$20mn respectively.
- By applying the respective FY16 operating-margins for these two segments to the revenues, we derive a combined c.S$77mn profit from Rental and Advertising, directly attributable to the Rail network.
- Overall Rail business thus brought in c.S$67mn in profits.
Restoring the aging Rail network,Rail MRE to hover about 45% to 50%
- Management outlined several ongoing multi-year renewal works to address the reliability of the aging rail network. These include replacing escalators and screen doors, upgrading of signalling system on the North/South Line (due to be completed this year) and East/West Line (expected to be completed in 2018), sleeper replacement on East/West line (scheduled completion early next year), Third Rail Replacement (scheduled completion next year), power expansion/upgrade (2~3 more years), new rolling stock and life extension of existing rolling stock.
- Rail Maintenance-related expenses (MRE) for 4QFY16 was at 53% and Management expects it to hover about 45% to 50%.
Maintain at "Reduce" rating with new higher target price of S$1.42
- We see lower earnings going forward, with profits from the Bus segment being insufficient to offset the Rail losses. However, there is an improvement in free cash flow.
Richard Leow CFTe
Phillip Securities
|
http://www.poems.com.sg/
2016-04-29
Phillip Securities
SGX Stock
Analyst Report
1.42
Up
1.17
