• 2 Feb 12 : StarHub (Q411) – EPS 5.4ct (todate 18.4ct) ; Div 5ct (todate 20ct)
  
• 7 Feb 12 : SATS (Q312) – EPS 3.5ct (todate 10.9ct)
  
• 12 Feb 12 : SBSTransit (Q411) – EPS 1.43ct (todate 11.89ct) ; Div 2.8ct (todate 5.9ct)
  
• 13 Feb 12 (AM) : SingTel (Q312) – EPS 5.66ct (todate 16.95ct)
  
• 13 Feb 12 : ComfortDelgro (Q411) – EPS 2.7ct (todate 11.27ct) ; Div 3.3ct (todate 6ct)
  
• 22 Feb 12 (AM) : MIIF (2H11) – Div 2.75ct
  
• 23 Feb 12 : STEng (Q411)
  

STI = 2995.59 (-29.48)

Transport

TELCO

Funds / Infrastructure

* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.3400) fm Yahoo

NOTES :

• Mkt Price is as on 22-Feb-12
  
• MIIF : 1H11 (Jun) – 2.75ct ; 2H11 (Dec) – 2.75ct
  
• ComfortDelgro : Q411 (Dec) – 3.3ct ; Q211 (Jun) – 2.7ct
  
• SBSTransit : Q411 (Dec) – 2.8ct ; Q211 (Jun) – 3.1ct
  
• StarHub : FY12 Div Guidance – 5ct/Q
  
• StarHub : Q411 (Dec ) – 5ct ; Q311 (Sep) – 5ct ; Q211 (Jun) – 5ct ; Q111 (Mar) – 5ct
  
• SingPost : Q312 (Dec11) – 1.25ct ; Q212 (Sep11) – 1.25ct ; Q112 (Jun11) – 1.25ct
  
• M1 : 2H11 (Dec) – Final 7.9ct ; 1H11 (Jun) – Interim 6.6ct
  
• SATSvcs : Q212 (Sep11) – Interim 5ct
  
• SingTel : 1H12 (Sep11) – Interim 6.8ct
  
• SMRT : Q212 (Sep11) – Interim 1.75ct
  
• SPH : 2H11 (Aug) – 9ct (Final) + 8ct (Special) ; 1H11 (Feb) – 7ct
  
• ST Engg : 1H11 (Jun) – 3ct
  
• SPAus : 2H11 (Mar11) – A4ct (before tax) / A3.7721ct (after tax) ; 1H11 (Sep10) – A4ct (before tax) / A3.7772ct (after tax)
  

•Results showcase defensive earnings

•Final dividend of 3 S cents declared

•Forecasting margin expansion in FY12

4Q11 results within expectations.

Raffles Medical Group (RMG) reported its 4Q11 results which were within our expectations. Revenue rose 13.9% YoY and 4.6% QoQ to S$72.3m. Net profit increased 10.3% YoY and 39.9% QoQ to S$16.5m. For FY11, revenue of S$272.8m represented a 14.1% increase, and just 0.5% shy of our forecast. Reported PATMI rose 11.3% to S$50.4m. Excluding fair value gains on investment properties of S$2.2m, we estimate that core PATMI rose 14.1% to S$48.2m, forming 99.2% of our earnings projection. A final dividend of 3 S cents was declared, bringing full-year dividends to 4 S cents. This translates into a yield of 1.6% and was higher than FY10′s declared dividends of 3.5 S cents.

Benefiting from robust demand for quality healthcare services

We understand that RMG’s increment in revenue was driven largely by ASP increases, while volume growth contributed to a smaller extent. This improved performance was attributed to growth from its core Hospital Services and Healthcare Services divisions, which saw a double-digit jump in revenue of 14.6% and 10.9%, respectively. The former was driven by higher patient loads and a wider range of medical specialties on offer. Moving forward, we see margin expansion arising from further ASP increases, narrowing losses at its Shanghai medical centre and higher revenue intensity per patient.

Expansion taking place steadily

Management updated us that the 15,000 sf of new medical space to be created at its existing Raffles Hospital would be ready for use in Apr 2012. This would allow the group to accommodate an additional 15-20 new specialists. Commencement of operations at its new Specialist Medical Centre in the Orchard Road area is also expected to take place in 1H13, while we believe that its hospital expansion would be ready in 2014. We finetune our assumptions and introduce our FY13 estimates. Maintain BUY with a higher fair value estimate of S$2.66 (previously S$2.61), still based on 24x FY12F EPS.

THE BUZZ

Singtel announced yesterday that its wholly- owned subsidiary, Optus Mobile Pty Ltd has signed an agreement to acquire all the issued shares in Vividwireless Group (VW) Ltd from Network Investments Holdings Pty. Ltd for a cash consideration of AUD230m. Vividwireless holds spectrum licenses in the 2.3GHz band and operates two wireless broadband businesses under the brandnames of ‘vividwireless’ and ‘unwired’. The completion of the transaction is subject to various conditions precedent including the reissue of the 2.3GHz spectrum licenses and approvals of the Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board.

OUR TAKE

Zeroing in on the spectrum. We view the acquisition positively for Optus given the access to 98MHz under the 2.3Ghz band, a prized asset that will complement the 1800MHz band being used for its upcoming 4G (LTE) mobile rollout. Optus stands to gain immediately from an existing fixed wireless brand in the market and a ready base of customers to migrate, allowing for the up-selling and cross selling of bundled mobile and broadband packages. This should result in longer term ARPU accretion and stickiness. We believe Optus will be add value to VW than it would be possible under Seven Network as it is already supplying backhaul infrastructure to VW. The acquisition is well timed ahead of the move into next generation networks (NGN) where competition in the market is expected to intensify. There is strong potential for mobile and wireless broadband in Australia given the estimated broadband penetration of 49% in the country. Also, the vast terrain makes wireless broadband more a more cost effective solution to reach out to certain sections of the market which are not covered by fixed access.

A HIGHER patient load and wider range of medical specialities helped private healthcare provider Raffles Medical Group (RMG) post an 11.3 per cent rise in net profit to $50.4 million for the financial year ended Dec 31, 2011.

Revenue rose 14.1 per cent to $272.8 million, spurred by growth in both hospital services and healthcare services. Profit from operating activities came to $59.5 million, up 12.3 per cent from just under $53 million previously.

Earnings per share rose to 9.5 cents from 8.65 cents a year earlier.

RMG directors have recommended a final dividend of three cents per share, which would take the total payout for FY11 to four cents per share. An interim dividend of one cent was paid in September last year.

In 2011, foreign patients made up about a third of Raffles Hospital’s patient load, an increase of 5-6 per cent in volume, executive chairman Loo Choon Yong said. Revenue from foreign patients was up 14 per cent year on year.

‘With additional beds of new public and private hospitals coming onstream over the next few years, the healthcare landscape will continue to remain competitive,’ the group said.

‘While adding the Specialist Medical Centre in Orchard Road and expanding Raffles Hospital, the group continues to be vigilant and responsive to new opportunities that may appear.’

Upcoming hospitals such as Parkway Pantai’s 333-bed hospital at Novena – slated to open later this year – could intensify competition, Dr Loo acknowledged, though hospitals located closer to Novena may face stiffer competition.

In an update on its expansion plans, clinical operations at its Specialist Medical Centre on Orchard Road are likely to begin in the first half of 2013.

Planning and prepatory work to boost Raffles Hospital by some 102,400 square feet is underway and on track.

As at Dec 31, 2011, the group had a cash position of $50 million, which will help it to fund growth opportunities, it said.

Shares in RMG shot up nine cents yesterday to close at $2.44.

FY11 results were a non-event. Management’s confidence was evident in its strong dividend commitment amid expansion. Property decanting is in play.

FY11 core profit meets consensus and our expectations (99%). We lower FY12-13 by 2% to reflect a maturing landscape, though our target got a lift from higher peer valuations (20x CY13 P/E, previously 22.5x CY12). FY14. EPS has been introduced. Maintain Outperform.

Strong dividend signal

4Q11 core EPS makes up 33% of FY11, a strong quarter. FY11 growth was powered by all divisions (Healthcare Services +10.9% yoy; Hospital +14.6% yoy). Hospital growth was spurred by volume (+5%), prices and the number of intensity cases (+9%). A final dividend of 3cts has been declared. Adding in its interim dividend of 1ct, FY11 DPS will be 4cts (FY10 3.5cts). We read this as a strong vote of management’s confidence in the health of its businesses and cash flows, despite capex commitments.

Properties at play

Planning and preparatory work for its Raffles Hospital (RH) expansion and Specialist Medical Centre is underway. In Jan 12, the group had decanted 15k sf of space (admin/backroom) in RH for conversion into healthcare dollar-churning businesses, contributing from 2Q12 onwards. RFMD also brought 5k sf of space in Samsung Hub in the CBD for use as a medical centre. Rental revenue from its two Orchard and CBD properties amounted to S$10.5m in FY12 (S$7.9m in FY11).

New government scheme

We expect RFMD to benefit from recent government initiatives to expand the Community Health Assist Scheme. Catalysts are expected from the addition of clinics/medical specialties, patient growth and intensity cases. We believe management has every reason to look at rate and fee hikes, now that RH’s charges are below market rates.

Sector Overview

The Transportation Sector under our coverage consists of Airlines (SIA, Tiger Airways), Shipping (NOL), Land Transport (SMRT, ComfortDelGro) & Aviation Services (SIA Engineering, ST Engineering, SATS).

• Government initiative to fund bus capex

• Profitability of bus business had been poor

• Mildly positive for Land Transport operators

• Continue to prefer ComfortDelGro over SMRT

What is the news?

Singapore's government announced a commitment to increase bus capacity in Singapore over the next 5 years. The government recognized that planned rail capacity injections from the new rail lines would take time to materialize, but easing of daily congestion is a more immediate task. Consequently, the government would partner the public transport operators (PTOs) to add c.800 buses into the system over the next 5 years. Of these new buses, the government would fund the purchase of 550 buses, while the PTOs would add the balance 250. To fund this purchase and the running costs for 10years, the government will establish a Bus Services Enhancement Fund worth S$1.1bn.

How do we view this?

We view this as mildly positive for the Land Transport operators (SMRT, ComfortDelGro). Higher CAPEX and increased operating expenses due to the increase in fleet size had been a drag on the profitability of the bus business for both PTOs that are struggling to breakeven in recent quarters. SBST and SMRT operate c.3k and c.1k buses respectively and the capacity injection would increase capacity by 20%.

Investment Actions?

We continue to prefer ComfortDelGro over SMRT due to its cheaper valuation and better geographical diversification. While the initiative is positive for the PTOs, We opine that better clarity on the future fare review mechanism would provide better confidence to investors.

Downgrade to Hold. We expect SingTel’s EBITDA margin to remain under pressure for the next few quarters as the telco focuses on building its mobile customer base aggressively in Singapore. While it expects long-term benefits, the costs related to its build-up of mobile device content, as well as subscriber acquisition and retention, are expected to stay high, thus eating into margins.

3Q12 results below expectations. SingTel’s 3QFY Mar12 results fell short of expectations, reflecting higher acquisition and retention costs on a strong mix of smartphones and tablets in Singapore and weak associate contributions. However, we had expected this, following similar trends in M1′s results. The only question was the extent of the damage to margins, which was quite severe in 3QFY Mar12, down to 32.7% from 34.5% in the previous quarter and 35.9% a year ago.

Margin decline to continue. SingTel has seen its EBITDA margin decline for four quarters now. However, there is likely to be further downside in the short term. In particular, management mentioned that it will step up its level of aggression to acquire smartphone and fibre customers as NGNBN rollout progresses. In the long run, it hopes to reap the benefits of upselling customers on a wider range of services but the short-term, impact on margins will be negative.

Older and wiser on BPL but… The better news is SingTel is unlikely to want to be perceived as Mister Moneybags again when bidding for the 2013-16 seasons of the BPL starting in March 2012. According to Mr Allen Lew, SingTel’s Singapore CEO, it will be “a bit wiser on this”. However, cross-carriage notwithstanding, management still views BPL as a key piece of content. Depending on the dynamics with the content owner, SingTel may not have a choice but to bid aggressively.

Lack of catalysts. While we do not expect any positive catalysts in the near future, we also do not anticipate any event that could pull the rug from below SingTel’s earnings, which should remain fairly resilient. We value SingTel at $2.95, or 13x FY Mar12 earnings, similar to the region’s integrated telcos as well as its own historical average PER.

Company Overview

ComfortDelGro Corporation (CDG) is a land transport conglomerate with businesses across various business segments and geography. The bus and taxi businesses are the largest profit contributors for the Group.

• Net income increased 3.1%y-y

• Higher fuel expense, staff cost & depreciation expense resulted in a 0.4ppt decline in EBIT margin

• Final DPS of 3.30cents proposed

• Maintain Buy with revised TP of S$1.66

What is the news?

CDG announced a 6.4% and 3.1% increase in sales and net income for the year. However, margin pressures from higher fuel expense, staff cost and depreciation expense resulted in a 0.4ppt decline in EBIT margin. While revenue continue to increase sequentially, 4QFY11 net profits fell by 18%q-q, due to a c.S$10mn decline in operating profits for both the taxi and bus businesses. Final dividends of 3.30cents proposed, translating to a full year payout ratio of 53.3%.

How do we view this?

The results for the year were slightly weaker than expected. Key variances from our 4QFY11 estimates were 1) Operating losses of S$5mn at SBST’s bus business; 2) c.3.4% decline in average passenger rail fare; 3) operating losses at China’s bus business. Looking ahead to FY12E, we believe that rail business would likely register a decline in margins as the company increase staff headcount in preparation for the launch of Downtown Line (DTL) at the end of FY13E.

Investment Actions?

We revised our forecasts down by 7.9-11.4% for the next 2 years and lowered our target price to S$1.66 based on 15X FY12E EPS. CDG remains undervalued at the current market price. Maintain Buy.

We are little less optimistic on SingTel after its conference call today as the negatives pileup: rivalry in Australia’s mobile sector remains stiff and competition could intensify in the Philippines. We also see Australia’s fixed broadband competition heat up due to the NGNBN.

SingTel intends to retain its rights to carry the BPL but expects to be more rational with its bid. We downgrade SingTel to Neutral from Outperform, maintain our earnings estimates but tweak our SOP-based target price given its rising risks and CIMB’s rising optimism on the stock market.

What Happened

SingTel held a conference call after its 3QFY12 results. We are a little more negative on the stock as we think fixed broadband competition in Australia may intensify ahead of the introduction of the next generation broadband (NGNBN), similar to what happened in Singapore. Competition in the Australian mobile space remains intense with no sign of a let-up.

In Singapore, it expects to be more rational in bidding for the rights to the 2013-15 BPL seasons in 2H12. We believe SingTel intends to win the rights to this content, although it will be non-exclusive, given that is the anchor content for its pay TV.

We expect SingTel to continue to aggressively acquire both mobile and fixed broadband customers given its view to upsell them with content and applications down the road. It has a commanding 63% market share in fibre broadband.

What We Think

We think risks are rising for SingTel. Competition in Australia’s fixed broadband could intensify with the migration to NBN, similar to what happened in Singapore. StarHub’s broadband revenue and ARPU declined ahead of the launch of NGNBN as it jostled with SingTel for market share. In the Philippines, we think competition will be intense despite industry consolidation as Globe and PLDT slug it out for market share. Lastly, the Indian rupee remains weak.

What You Should Do

We advocate switching from SingTel to StarHub which we think will undertake a capital management in 2H12. We think SingTel’s earnings will likely be flattish in the coming quarters with growth in Singapore offset by competitive pressures in Australia, the Philippines and currency weakness in India.

Full-year net up 3.1% at $235.6m; rise driven mainly by taxi, rail businesses

COMFORTDELGRO’S net profit for the 2011 fourth quarter climbed 3.5 per cent to $56.5 million, from $54.6 million a year earlier.

The rise in profit attributable to shareholders came on the back of a 7.2 per cent year-on-year rise in group revenue to $887.2 million.

Total operating expenses for the quarter increased 7.7 per cent to $791.5 million, contributed in part by a 20.2 per cent year-on-year surge in fuel and electricity costs to $73.9 million. The quarter saw taxi drivers’ benefits dropping 14.2 per cent to $19.3 million.

For the full year ended Dec 31, 2011, net profit rose 3.1 per cent to $235.6 million, with the increase driven mainly by its taxi and rail businesses.

Full-year revenue climbed 6.4 per cent to a record $3.41 billion, with the land transport giant attributing growth from all business segments. Revenue could have been higher if not for the negative foreign currency effect of $16.0 million.

Group operating expenses for the 12 months rose 6.9 per cent to $3.01 billion on increases in materials and consumables, fuel and electricity costs, staff costs and depreciation, among others, although these were mitigated by a positive foreign currency translation effect of $20.2 million. For example, materials and consumables jumped 23.8 per cent to $336.4 million, while fuel and electricity costs surged 20.7 per cent to $283.3 million. Staff costs, the group’s biggest cost component, rose 5.0 per cent to $1.04 billion. Taxi drivers’ benefits fell 14.3 per cent to $66.7 per cent.

Operating profit was 2.8 per cent higher at $399.2 million.

ComfortDelGro said that overseas operating profit accounted for 45.8 per cent of group operating profit, while overseas revenue made up 42.2 per cent of group revenue. Its global fleet size of buses, taxis and rental vehicles has also increased to a record of some 46,300 vehicles.

Full year earnings per share rose to 11.26 cents from 10.95 cents, while the group’s net asset value was 90.46 cents as at Dec 31, 2011, up from 86.20 cents 12 months earlier.

A final dividend of 3.30 cents per share has been proposed.

As its biggest business segment, buses brought in revenue of $1.69 billion for the group in 2011, or up 4.5 per cent. Operating profit slipped 2.8 per cent to $145.0 million due mainly to decreases in SBS Transit and the China bus business but was offset by an increase in the Australian bus business. The operating profit of the overseas bus business continued to outstrip that of the Singapore bus business and accounted for 85.8 per cent of group bus operating profit.

The group’s taxi business chalked up revenue of $1.039 billion or a 5.8 per cent hike, with taxi revenue crossing the $1 billion mark for the first time thanks to a larger global fleet. Operating profit rose 8.6 per cent to $129.6 million. In Singapore, revenue from the local taxi business climbed 7.6 per cent to $748.7 million due to an increase in replacement taxis, a larger fleet, and a higher volume of cashless transactions. Operating profit was 9.7 per cent higher at $83.8 million.

Revenue from the rail business grew 10.5 per cent to $134.4 million due to an increase in average daily ridership and in spite of lower average fares, with operating profit rising 8.2 per cent to $27.7 million.

Also showing an improvement in operating profit was the vehicle inspection and testing business. Revenue rose 8.7 per cent to $93.5 million, with operating profit rising 12.5 per cent to $30.7 million as more cars were inspected and higher sales were achieved by Setsco Services.

Looking ahead, ComfortDelGro sees bus and rail ridership increasing at a slower rate because of the expected economic slowdown. It expects revenue from the UK bus business to continue being affected by the currency translation effect of the weaker pound sterling. But improvements are likely from the Australian bus business, and the taxi businesses in Singapore, China and Australia.

ComfortDelGro shares closed trading yesterday at $1.48, up half a cent.