SMRT

SMRT: CS downgrades to U/p, TP $1.30 from $1.60. Note that tighter liquidity stemming from higher capital expenditure and lower earnings over the next few years suggest that dividends are likely to be further reduced. The co has already cut interim dividends 14% and its reticence on dividend guidance increases doubts that payout will retain 80-90% levels of recent years. Labour costs are also expected to trend higher as the group continues to hire for its bus and rail divisions. R&M costs are also expected to remain high after 3 quarters of 30% YoY growth. Rental revenue, which is the largest contributor of growth for the last 5yrs, is unlikely to grow at previous years’ pace.