SMRT: may see some interest after the Transport Minister announced that the Circle Line (CCL) extension will open on 14 Jan next yr, ahead of mkt expectations.
The extension comprises a new station at Bayfront and will connect CCL to the existing N-S Line at Marina Bay station. The 2 additional CCL stations are expected to serve the integrated resort (MBS) and the new Int’l Cruise Terminal.
Deutsche highlights that it recently upgraded SMRT to a non-consensus Buy (TP $2.21), on expectations that CCL ridership growth will surprise on the upside. Notes its view is supported by its own ridership checks which showed a surge in CCL commuter flows post opening of stages 4 and 5. Believes that the worst of SMRT’s operational challenges are largely behind. Says, while valuations (at 19x FY12E P/E) are not cheap, the expected operational turnaround, consequently robust earnings growth and defensive 4-5% dividend yield are key differentiators.
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