SMRT has been kept at Buy by Deutsche Bank, however, the research house lowered its TP for the counter by 20% to $1.94. This implies a potential 31.5% upside from today’s opening price. The research house is concerned about various costs that could cause a drag on overall earnings. These include:
1. Higher staff expenses
2. Higher repair and maintenance costs
3. Higher depreciation cost from rail capex
4. Delay in the opening of the Tuas West Extension by a year to March 2017.
In spite of that, the research house continues to see positive catalysts for the counter. These include:
1. Bus reforms by 4QFY16
2. Tuas West Extension
3. Energy savings from lower fuel price
4. Increased ridership
5. Gross fare hike of 2.8% from April 2015.
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