ComfortDelgro/ SMRT

Land Transport/ ComfortDelgro/ SMRT: The LTA recently re-iterated the possibility of introducing competition in the bus services industry. However, as with before, OCBC do not anticipate any changes to the operating landscape in the mid-term unless the government decides how it wants to strike a balance between a free-market and government-assisted model. For the near-term, the street is awaiting the recommendations from the fare review committee and has already factored in some level of increase. That said, any further delays from this committee could lead to continued losses for both transport operators and even asset impairments for SMRT. OCBC downgrade the sector to NEUTRAL in light of this possibility but do not anticipate further deterioration in the share prices for both ComfortDelgro and SMRT at this juncture. Maintain its ratings on both SMRT (HOLD with TP of $1.45) and ComfortDelgro (HOLD with TP of $1.95) although OCBC favour the latter for its more attractive overseas ventures.