SMRT/ComfortDelgro – DMG

Land Transport Sector: ComfortDelgro and SMRT to join STI

ComfortDelgro (BUY\S$1.32\Target S$1.78)
SMRT (NEUTRAL\S$1.61\Target S$1.65)

SPH, SGX and FTSE Group announced the results of the half-yearly review of the STI and FTSE Index Series yesterday. ComfortDelgro and SMRT will join the STI in place of Yanlord and Keppel Land. Changes were also made to the other FTSE ST indices. All changes will take
effect from 23 Mar 09, with the next review scheduled for 10 Sep 09.

The changes reinforce our OVERWEIGHT stance on the land transportation sector. Positives
include public transport ridership growth in 2009 (although at a slower pace than in 2008) and lower crude oil prices, which will reduce diesel and electricity costs. Within the sector, we prefer ComfortDelgro, which has better potential for long term growth through its overseas operations – 42% of ComfortDelgro’s 2008 revenue came from overseas. Australia (7% revenue share) and China (8% revenue share) are potential growth drivers for ComfortDelgro.

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