SMRT – Phillip

Strong set of results

FY08 Results. SMRT reported FY08 revenue of S$802.1m (+7.9% yoy) and net profit of S$149.9m (+10.4% yoy). The growth in revenue was due to higher ridership, and growth from rental and advertising. This mitigated the increase in GST, CPF contribution and energy costs.

Performances by various businesses. SMRT registered growth in revenues from all its operations. There was strong growth in MRT (+8.0% yoy), LRT (+6.6% yoy) and taxi (+10.8% yoy) operations while the buses operation posted minor growth in revenue (+2.9% yoy). The increase in average daily ridership resulted in the growth in revenues from the train and buses operations while the higher average hired-out fleet caused the growth in taxi operations.

Furthermore, SMRT also saw strong growth in revenues from rental (+21.8% yoy), advertising (+16.7% yoy) as well as engineering and other services (+13.2% yoy).

FY09 Outlook. Management expects revenues from all its operations to increase in FY09. However, operating expenses are also likely to rise. It also mentioned the increase of staff in preparation for the opening of Circle Line Stage 3.

Maintain HOLD recommendation, target price raised from S$1.70 to S$1.74. SMRT has posted good financial results. Moreover, it continues to register increases in revenues and profits. Therefore, the fair value is raised to S$1.74 based on our discounted cash flow model. This is a defensive stock for investors who would like to hold for payment of dividends.

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