Results largely in line

Reiterate BUY rating at fair value estimate of S$1.92. The full year results for FY2009 announced recently were largely inline with our estimates. The Group produced relatively good results as well as a final dividend proposal of 6 cents per share. We have adjusted our operating expenses slightly thus our discounted free cash flow to equity model eased our fair value estimate to S$1.92 (previously S$1.97).

Growth delivered in earnings for FY2009. The Group announced growth in revenue of 9.6%, from S$808.12 million in FY2008 to S$878.95 million in FY2009; and registering growth in net profit after income tax of 8.5%, from S$149.94 million in FY2008 to S$162.73 million in FY2009 on the back of higher operating profits coupled with government budget measures. The Group attributes the growth in revenue to mainly higher train and bus ridership, higher rental and advertising revenue, increased consultancy revenue and higher project management fees. MRT ridership increased 8.7% to 510.2 million together with a full year ridership growth of 3.9% to 288 million for buses. The taxis segment however, suffered a full year operating loss due mainly to higher loss on disposal of taxis.

The rental segment achieved a growth of 37.0% from S$41.98 million in FY2008 to S$57.53 million in FY2009 due mainly to better yield and increased space following the redevelopment of commercial spaces at various MRT stations. Advertising revenue increased 13.8% from S$19.81 million in FY2008 to S$22.54 million in FY2009, mainly due to increased advertising on buses, taxis, trains and at MRT stations. Revenue from Engineering and Other Services increased as well. From S$23.54 million in FY2008 to S$36.46 million in FY2009 due mainly to increased consultancy revenue, higher diesel sales and higher project management fees from the Palm Jumeirah Project in Dubai.

Rise in operating expenses. The Group’s expenses increased by 11.2% from S$644.95 million to S$716.94 million. This was due to a rise in staff and related costs of S$13.9 million (5.3%) in FY2009, increase in depreciation by S$4.3 million (4.0%), higher repair and maintenances costs by S$3.1 million (5.0%), electricity and diesel costs increasing by S$29.1 million (32.4%) and an increase in other operating expenses by S$21.6 million (17.6%) in FY2009.

Circle Line Stage 3 commencing in May 2009. The rolling out of the circle line in May this year should seek to increase ridership further although we do also believe that this should lead to higher expenses in the coming first quarter 2010 due mainly to higher staff and related costs, as headcount is expected to increase for the circle line launch.

Final dividend proposed. The Board of Directors proposed a final ordinary dividend of 6.00 cent per share, totaling S$91.0 million. The final dividend, if approved, will bring the total dividend per share to 7.75 cents for the year.

As expected as train arrivals

• 4Q09 results within expectations
• Train ridership up by a firm 9% y-o-y, but expect slower growth in FY10F.
• Dividend of 6 cents, bringing full year dividends to 7.75 cents
• Maintain Hold with TP: S$1.65.

4Q09 net profit $39m (+8% y-o-y). 4Q net profit of S$38.7m (+13% y-o-y, -6% q-o-q) was in line with expectations. Topline ended at $116.2m, up 4% y-o-y. For full year, revenue and net profit ended at $879m (+10%) and $163m (+9%), respectively. Its MRT, rental and advertising continued to be the main contributors to its operating profit. Bus division was affected by higher diesel costs and maintenance, while losses at Taxi division was due to lower hired out rate and losses on disposals.

Final dividend of 6.0 cents. A final dividend of 6.0 cents was proposed, bringing total dividends to 7.75 cents for the full year. This equates to a payout of 72% of PATMI. Book closure date is 30 Jul 09.

Outlook. Train ridership for FY09 was up 9% to 510.2m rides. We expect ridership to remain relatively firm, albeit growing at a slower pace. We are assuming a 3% and 1% growth for its train and bus ridership in FY10F respectively. Rental should continue to see growth, albeit slower, on higher lettable space. Advertising should be affected by the slower economy.

Maintain Hold, TP: S$1.65. We maintain our Hold recommendation, TP: S$1.65 still based on 14x FY10F PER (mid-trading range). Our forecasts are trimmed slightly by 3-4% largely on a lower ridership growth. We believe the stable operations, relatively resilient business model and a 5% yield should provide support to the share price.