On track

Maintain Outperform; target price raised. On Tuesday, we attended a conducted tour of the Circle Line (CCL) Stages 1 & 2, which will officially open on 17 Apr. Although SMRT’s stock price has gone up 27% since our upgrade in 4Q09, we believe there is further upside as the opening of Marina Bay Sands in mid-2010 is likely to give its MRT ridership another jolt. YTD MRT ridership has exceeded our expectations. We raise our FY10-12 earnings estimates by 1-3% to account for the higher ridership, which lifts our DCF-derived target price from S$2.26 to S$2.41 (WACC: 9%, terminal growth: 2%).

CCL expected to break even by 2011. Train ridership for Stage 3 now stands at 49,000-50,000/day. Officially, LTA is expecting CCL to directly benefit 200,000 commuters daily, once Stages 1 and 2 are opened. However, SMRT is more optimistic, and expects ridership to exceed LTA’s targets. SMRT expects CCL to break even once the last two stages (4 and 5) open in 2011.

SMRT has more to gain than ComfortDelgro, we believe. As a bigger train operator than CD, SMRT should be a bigger beneficiary of higher tourist arrivals in Singapore and population growth. We also believe its rental revenue will grow as its commercial space increases with the new CCL. More than 80% of the 2,500-plus sq m commercial space available has been snapped up.

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