SMRT

SMRT: Announces $900m in planned renewal and preventive maintenance for a safe and reliable system. The $900m is currently an indicative bill and co is in discussions with LTA on how to share the costs. This is expected to be spread over a span of 8 yrs with majority of works during the first 3-4 yrs. $195m has alr been slated for a new signaling system announced in Feb to be undertaken by a firm headquartered in France. Another $3m has also been budgeted to change propulsion systems. Under an old arrangement, the Sg govt is supposed to foot the bill for rail infrastructure and SMRT for the operating assets. Aft 2010, a new arrangement was formed, with the govt taking over ownership of operating assets and leasing them to the operators for a fee, which the Downtown Line currently operates under. As of Dec-end 2011, SMRT had net cash of $32.3m with cashflow from operations of $58.4m. Total debt/equity ratio at that time was also 1.2x. Depending on the cost-sharing arrangements and the actual expenditure over time, SMRT will likely have to raise funds or reduce dividends. SMRT currently has an est dividend yield of 4.7% and will release Mar-end results on 30th Apr after mkt hrs. Deutsche downgrades to Hold from Buy and TP from $2.00 to $1.75