SMRT – DBS

1Q09 results in line

Comment on Results

SMRT’s 1Q09 earnings were in line with expectations. The Group’s net profit rose by 6.2% yoy to S$40.3m on revenue growth of 11.2% yoy to S$216m. Revenue growth was primarily driven by MRT business (+8.2% to S$116m), due to higher rider-ship, as well as the rental business (+47% to S$13.8m). Higher operating profit at the MRT division (+9% yoy to S$35m) and Rental business (+51% to S$10.3m) helped offset losses at the bus division (from profit of S$0.5m to loss of S$3.3m) and taxi division (higher losses of S$1.3m compared to S$300k in 1Q08), both of which were affected by higher fuel costs.

Recommendation

Looking ahead, we expect the Group’s core MRT business to continue faring well on firm rider-ship growth, which should help to alleviate the weak performance of the bus and taxi businesses. Higher rental income on increased floor space and improved rental yields should also help to contribute to higher earnings for SMRT. Whilst earnings growth in the immediate term could be flattish as the Circle Line is being readied (Circle Line Stage 3 is expected to commence in mid 2009) and rolled-out, we continue to be positive on the long-term prospects of the Group, on higher rider-ship and greater use of trains as a mode of public transport.

Maintain BUY, TP S$2.00

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