SMRT

SMRT: 1QFY15 results in line. Net profit increased 36.8% to $22.4m, while revenue rose 4.3%. Fare business recorded operating loss of $1.1m, closing the gap by 79.5% on growth in ridership and average fare, weighed by higher depreciation, repair and maintenance, and a $1.6m LTA fine. Non-fare business’s operating profit was 17.4% higher at $29.9m, as taxis contributed higher rentals from a newer fleet and lower diesel tax. Higher renewal rates in the rental segment also boosted bottom line for non-fare segment. Management is optimistic on improving prospects with the impending regulatory changes, but there remains a lacking of details on the impending transition to the new rail model, and Maybank-KE and DBS reckons that the 60% YTD share price rally has largely factored in the potential positives. Particularly, DBS highlights while current share price isn’t excessive, but investors are reminded that the changes will only come in 2 years later. SMRT is trading at 26x annualized 1QFY15 P/E Latest broker ratings: Maybank-KE maintains Hold with TP of $1.36 DBS Vickers maintains Hold with TP of $1.60 Deutsche Bank maintains Buy with TP of $1.90