SMRT

SMRT: Deutsche Bank urges investors to look beyond immediate term weakness, as it believes SMRT will benefit from moderating costs and changes to public transport operating framework, thus driving earnings growth. On the improvement of operational performance, the house expects a deceleration in opex increase to support margin improvement and drive earnings growth in FY15, plus a boost by a fare hike in 2014 The house also highlights that it expects a cost-plus model to be adopted for the bus segment in 2015, which could drive sector net profit after tax (NPAT) growth to 35% vs a status quo 10% increase. A significantly more collaborative relationship with regulators also boosts optimism for reforms to be implemented prior to 2016. Deutsche also thinks that the operating framework can be extended to the rail segment. The house has a Buy call on SMRT with TP of $1.72