SMRT Corporation - RHB Invest 2016-06-06: Board Renewal Deferred

SMRT Corporation - RHB Invest 2016-06-06: Board Renewal Deferred SMRT CORPORATION LTD S53.SI 

SMRT Corporation - Board Renewal Deferred 

  • In its recently published annual report for FY16, chairman Koh Yong Guan stated that in the coming year, the planned transition to the new rail financing framework (NRFF) will need the Board’s closest attention. Hence to ensure board continuity, SMRT has decided to defer the planned Board renewal. This strengthens our belief that that implementation of rail reforms may be coming soon. 
  • In our recent report (Rail Reforms May Be Coming Soon, 4 May 2016), we had highlighted that the implementation of the NRFF is becoming more of an eventuality. 
  • We maintain that implementation of NRFF would be positive for SMRT, as it not only converts its rail business into an asset-light model, but also enables the division to probably earn a conservative 5% operating margin. 
  • While the transition of SMRT’s rail business to the NRFF may occur anytime between the commencement of the Government Contracting Model (GCM) for its bus division and 2019, we conservatively estimate the rail reforms to be implemented in early FY20. 
  • We maintain BUY on SMRT with DCF-derived SGD2.25 TP.

Shekhar Jaiswal RHB Invest | http://www.rhbinvest.com.sg/ 2016-06-06
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 2.25 Same 2.25