SMRT

SMRT: Maybank-KE upgrades SMRT to Hold and TP of $1.36 (from $0.80), after the recent restructuring by LTA on the public bus industry to a government contracting model. With bus operations on track for a fare-independent, asset-light model, house envisage a similar operating model for rail. Maybank-KE reckons that this is a sustainable solution that allows the government to inject additional capacity and implement fare adjustments without affecting the profitability of the operators. The wide range of outcomes suggests challenges in deriving post-transition valuation without any concrete details. Furthermore, the valuation outcomes are highly sensitive to margin assumptions. Taking a leaf from the public bus transition, house expect a favourable rail transition to benefit SMRT the most.