SMRT

SMRT: Group announced a profit warning for the 4Q13 period, ending 31 Mar 2013, due mainly to increasing wages without corresponding fare adjustments; in addition, an impairment $17m of goodwill in its associate, Shenzhen ZONA Transportation Group is made, resulting in a loss for 4Q FY2013, but will maintain a profit for FY13. Street estimates of $121m for FY13 will miss by at least 21%, given that 9MFY13 earnings were $95.2m with the expected 4Q13 loss. On the outlook for FY14, continued investments in headcount and repairs & maintenance suggest margins will remain relatively depressed. DB anticipate the 2013 fare adjustment and ongoing government support will help alleviate some cost pressures and potentially drive profitability improvement in FY14. Both Nomura and DB notes that there could be a substantial downside risk to SMRT's dividends; UOB Kay Hian has reduced FY13 dividend forecast to 6.1¢ (from 6.4¢), implying a yield of 3.8%. Previously, a dividend of 8.5¢ and 7.45¢ were paid out in FY11 and FY12 respectively. UOB Kay Hian maintains a SELL, and has a TP of $1.30; CIMB maintains UNDERPERFORM, has TP of $1.53