SMRT CORPORATION LTD
S53.SI
SMRT - Temasek reportedly mulling buyout of SMRT
- Temasek said to be contemplating buyout offer for SMRT.
- Potential offer could derail our current fundamental- based investment thesis.
- Assumed 30% premium to our current TP equates to 8% premium to last traded price.
- Putting our last recommendation Under Review pending further developments.
WHAT'S NEW
- According to news reports, Temasek is said to be weighing the option of taking SMRT private.
- The potential valuation is unclear given that with the unveiling of the New Rail Financing Framework, we are projecting that SMRT's profits will drop a notch down given the cap on margins for its SMRT train operations (inclusive of rental and advertising under trains).
- We have just revised down our forecasts and trimmed our recommendation (to FULLY VALUED, TP: S$1.28, from HOLD, TP: S$1.53). The potential buyout offer will derail our thesis, which was based on a fundamental perspective.
- Assuming a minimum 20% premium to our TP, this leaves a marginal premium to its last traded price. A higher premium is unlikely as this will equate to a very high valuation, considering that SMRT’s profitability is projected to be subdued under the New Rail Financing Framework.
- At this juncture, our take is for a probable 25-30% premium to our TP as it will entail a marginal premium to its last traded price of S$1.545.
- We are putting our recommendation Under Review, pending further developments.
Andy Sim CFA
DBS Vickers
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http://www.dbsvickers.com/
2016-07-19
DBS Vickers
SGX Stock
Analyst Report
1.28
Down
1.53
