SMRT

SMRT: SMRT 3QFY14 results missed estimates, with net profit lowered 44% y/y to $14.2m due to higher operating expenses mainly attributable to staff costs (+21.4%) from increased headcount in train and bus operations, and the recent wage revision exercise. Meanwhile, revenue improved 4.1% to $293.3m on the back of growth from rental (+11.2%), advertising (+27.4%) and engineering and other services (+46.8%). Operationally, bus and LRT remains loss making for the group, while train profits are slowly chewed off (-97%). Notably, rail operations (train and LRT combined) recorded its first ever quarterly loss of $0.2m, while its overall fare business (train, bus and LRT) suffered a $9.0m operating loss, in contrast to 3QFY13’s S$7.4m operating profit. Net gearing ballooned 7x to 64% on a $392.7m payment for 17 trains and operating assets taken over from LTA. At $1.19, SMRT trades at a 1.7% FY14 yield and 19.8x forward P/E, slightly above its historical average of 18.4x. Latest broker recommendations as follows: Maybank-KE maintains Sell with TP $0.60 DB maintains Buy with TP $1.80 OCBC place their Hold rating and $1.30 TP under review