SMRT

SMRT: UBS maintain Neutral and reduces to TP $1.70 from $1.85.
Govt-commissioned Committee of Inquiry to examine SMRT breakdowns assume SMRT would incur a $2-3m fine due to the breakdowns. Expect a permanent increase in repair and maintenance expenses, due to more frequent and intensive checks on its 24 year old NSEW trunk line.

Over FY02-11, SMRT’s average maintenance expenses amounted to 9.2% of revenue from trains, buses and taxis. If it rises to 10%, it implies an annual FY13-15E EBIT impact of ~S$6.0-9.4m. cut FY12/13/14/15E EPS by 2.7%/3.5%/4.3%/9.4% respectively. Believe SMRT’s financial ability to maintain its absolute level of DPS is high, despite rising cost.