SMRT – Lim and Tan

New Milestone

The stock hit an intraday high of $2.02 yesterday, before ending below the $2.00 resistance, that being the record closing high and first reached in May '07.

The April 17th opening of 11 more Circle Line stations (Stages 1&2 / Dhoby Ghaut to Tai Seng) could be a factor, although that's been known for a while now.

Stages 4 & 5 (12 stations / Caldecott to Harbourfront are scheduled for completion in 2011.

Other contributing factors behind SMRT's performance include:

– Singapore's continued population growth, now passing 5 mln.

– Strong recovery of tourist arrivals, with 2010 likely to surpass 2007's 10.3 mln peak.

– Continued growth in train ridership (hitting a record high of 47.25 mln in Dec '09), especially relative to bus, which has stagnated, and which explains SMRT outperforming Comfort Delgro, which remains stuck in the $1.50-1.70 range, and despite being the "favorite" of many to be appointed the operator of the new Downtown Line (40 km / 33 stations), scheduled for completion in 2016.

– The refurbishment of the Esplanade Exchange is expected to result in 2000 sq meters of additional rentable space. (Rental income is an increasingly important contributor to SMRT's bottom-line. As at end Dec '09, retail space totaled 29,028 sq meters, vs 23,501 sm three years ago.)

– Likely fare increase when PTC next conducts its annual review in July.     

SMRT is expected to release results for fiscal year ended Mar '10 around Apr 23rd. Final dividend will be no less than 6 cents after the 1.75 cents interim, which would make this the third consecutive year SMRT is paying 7.75 cents per share. At $1.99, yield is still a "decent" 3.9%.

We are keeping our BUY call. Trailing PE is 16.9x. (Profit for 9 months ended Dec '09 of $140.23 mln was up 13% over the same period the year before.)

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