ComfortDelgro/ SMRT

ComfortDelgro/ SMRT: The Fare Review Mechanism Committee (FRMC), tasked by the Transport Ministry to review the fare adjustment formula for public bus and rail fares has just announced that it will likely be delaying its final proposal to the ministry for a few months. CS had initially expected that fare hikes will be put in place on 1 Jul 2013 and in turn drive up 2H profitability for operators. House now expect earnings to reflect adjusted fares no earlier than 4Q13. Consequently, forward-year EPS forecasts were reduced by -8.5% and -3.3% for SMRT and ComfortDelgro respectively. CS continue to rate SMRT as UNDERPERFORM (TP of $1.15) and ComfortDelgro as NEUTRAL (TP of $1.85), as house expect increased regulatory oversight to keep a lid on their profitability.