SMRT

SMRT: 2QFYMar11 results. Revenue + 7.2% yoy, +1.8% qoq at $246m, underpinned by growth in train and bus ridership and higher rental and advertising revenue. But net profit -13% yoy, flat qoq, at $45.8m, driven by higher operating costs as the Jobs Credit scheme ended, and -1% in avg fares due to switch to the distance-based fare system…

Mgt guided for further rise in staff costs in 2H11, with headcount expected to increase by 5% to 6,700-6,800, as well as higher fuel costs as energy costs due to rising prices and increase in train runs. Growth of ridership for Circle Line (CCL) Stages 1-3 was below management's expectations coming in at 154k vs 200k breakeven target. Co declares interim div of 1.75cts/sh, unchg from last yr…

Deutsche, Citi, UOBK maintain Sell with targets btwn $1.90-1.95. Street view is that SMRT will continue to be weighed by higher operating costs (staff costs, unhedged fuel) and start up losses from CCL. Valuation at 20x PE is unattractive, vs low 3-yr CAGR of ~3%. UOBK recommends entry at $1.70.