SMRT

SMRT: Deutsche reiterates a Buy for SMRT, although upside to TP of $1.90 is just under 16%. House reckons that current share price indicates that the market is still assuming the bus business loses money after the reforms, a scenario which may be too pessimistic. Further upside to TP could come in the form of the sale of bus assets to the government (13-20¢/share) and rail reforms (62¢/share). In addition, the upcoming 1QFYMar15 results is expected to show improvements q/q and y/y on the back of fare increases, cost stabilization and from a low base effect. Next, house believes rail reforms in future may add an additional 62¢ to its TP, which may include a fare formula revision to factor in peak period fare surcharges, and an asset-light model which would enable LTA to gain more control over operating asset injections.