SMRT

SMRT: SMRT’s 4QFY15 results slightly missed, as net profit grew 23% to $20.8m, bringing full year net profit to $91m (+47%).

4QFY15 revenue increased 7.5% to $311.2m, with improved contributions from all segments. Train ($159.3m, +3.8%) and bus ($60.3m, +9.9%) revenues grew from increased ridership and fare, while taxi revenue ($36.8m, +7.3%) benefitted from a change in fleet composition and lower accident claim and insurance expenses.

Rental revenue was up 28.1% to $32.1m on increased rental rates, as well as contributions from Ang Mo Kio Xchange and Kallang Wave mall.

At the operating level, fare business’ loss widened to $3.2m from $3.8m, as rail recorded its first ever quarterly loss of $2.4m on increased staff costs, depreciation and repair and maintenance. This was slightly offset by a $0.9m profit from bus ops after 17 consecutive quarters of losses, from lower diesel costs.

Operating profit from non-fare business grew 18.7% to $30.7m on better performances in the rental and taxi businesses.

Management cautions for increased opex in the rail business, from larger headcount, train fleet, and network expansion, and higher fares (+1.9% effective April) and lower energy prices will only partially mitigate the higher operating costs.

In April, SMRT announced its partnership with OMGTEL to bid for the fourth telco license in Singapore. Maybank-KE is broadly positive on the venture, though it is still too early to quantify earnings impact.

The immediate catalyst for SMRT would be the potential bus asset sale to the government. Nevertheless this will be no impact to FY16 earnings. Meanwhile, discussions on the transition to the new rail financing framework are ongoing.

SMRT is currently trading at 22.5x FY3/16 consensus P/E.

Latest broker ratings:
Deutsche maintains Buy with TP of $2.43
UBS maintains Buy with TP of $1.81
UOB KayHian maintains Hold with TP of $1.73