SMRT

SMRT: LTA announced yesterday that independent assessment by a team of consultants to identify the root cause of the disruption has commenced and is expected to be completed in Aug 15. Hence, repairs and maintenance costs as well as staff expenses are expected to further increase as a result of the recent disruption, especially when SMRT has stated measures will be implemented to prevent a similar network-wide failure.

LTA is also likely to fine SMRT for incident, though it is unlikely LTA will charge SMRT with the maximum fine as such large financial penalty may impede SMRT’s ability to resolve the root cause, doing more harm than good.

OCBC reiterates its BUY rating with TP of $1.75 on the positive longer-term outlook. The house believes that SMRT’s steep decline in share price post disruption is overdone. SMRT’s longer-term catalysts driven by regulatory changes in SG’s bus and rail operating model remain intact.