SMRT

SMRT: 4Q saved by a one-off tax refund
- SMRT’s 4QFY16 headline net profit rose 27.6% yoy due to a large one-off tax refund, without which 4Q16’s net profit would have plunged 54.6% yoy.
- The weak 4Q core earnings was due to: 1) a 1.9% fare cut by the LTA; 2) ridership diversion to the DTL; and 3) higher rail maintenance-related expenses.
- Expect SMRT’s rail earnings to continue to face pressure from the above factors in FY17; believe new initiatives can hardly offset the downside risk from rail.
- Maintain Reduce with TP of $1.40.