SMRT

SMRT: 1QFYMar13 results broadly inline. Net profit at $36.5m, +5% yoy, flattered to some extent by $8m in rail insurance compensation. Operating revenues were $275m, +9% yoy, supported by steady ridership growth. Avg daily rail ridership grew 9% yoy, and this drove a fairly robust 11% (or $15m) rail revenue gain. Bus revenue growth was more muted at 3% yoy , on 3% ridership increase. Taxi revenues were +14% yoy on a larger hired out fleet, rental revenues +12% yoy, while ad revenues were up 13% yoy. Deutsche estimates underlying operating profit was $39m, -7% yoy, as margin compressed to a low of 14.3% on higher staff and energy costs. Believes energy costs will be mitigated by SMRT’s recent hedges, but expects sustained staff cost pressures on higher headcount. Deutsche keeps at Hold with TP $1.60. CIMB reiterates Underperform and TP $1.50. UOBK maintains Sell with TP $1.30, sees no turnaround in sight. Citi maintains Sell with TP $1.30, notes the following challenges that may curtail div payout and de-rate the stock; i) potential $900m rail upgrade costs, ii) subscale bus operation seeing mounting losses, iii) govt policy such as the Transport Masterplan, favoring public service quality over sh/h returns, iv) Circle Line ridership remains below breakeven, v) bids for further MRT line tenders in coming years.