SMRT – DB

Ridership growth momentum to continue

Nov09 rail ridership figures continued to show a gradual pick up in rail ridership on a 3M rolling basis (+3.8% YoY). Bus ridership grew by 1.7% YoY in Oct09, a turnaround from -0.3% YoY in Sep09, -1.0% YoY in Aug09 and -1.2% YoY in Jul09.

Rail ridership is up 3.0% YoY vs our forecast of 3.5% YoY and bus ridership is down 0.4% YoY vs. our forecast of -0.5% YoY. To date, both rail and bus ridership is tracking in line with our expectations.

We believe that the overall ridership trend for the sector should continue to improve, helped by the recovery in the economy and the opening of two integrated resorts in the 1Q10. Our top pick for the sector is SMRT. Our TP of S$2.00 implies potential total return of 16%. SMRT also offers a defensive yield of 4.7%.

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