Tuesday, November 27, 2012
SMRT: Approximately 102 SMRT Chinese national bus drivers went on strike early Monday morning due to wage disputes. According to local press articles, the drivers were disgruntled about a recent pay increase. Reportedly, Malaysian drivers received a $275 pay adjustment along with 1 month’s bonus vs Chinese nationals which received a $75 pay increase without bonus. It has been reported that the co will come back with a reply in approximately one week and the drivers will return to work. Deutsche says, while the financial impact of this devt is not material (estimate a <1% impact to net profit from a pay realignment), it highlights the sustained cost pressures taking place within the company. Recall that 2Q12 staffing costs rose 9.7% YoY. The house sees few positive near-term catalysts that will drive material re-rating from current levels – particularly given ongoing uncertainties around the company’s asset renewal plan and future growth profile. Maintains at Hold with TP $1.59.