Month: October 2007
SMRT – DBS
Tight cost management boosts earnings
Comment on Results
2Q08 results were above expectations as SMRT performed better than we expected in managing costs.
Revenue grew by 5.2% yoy to S$197m for the quarter whilst EBIT grew by 19% yoy to S$48m, as operating costs were flat yoy. Net earnings grew by 25% yoy to S$39.5m for 2Q08.
At half-time, SMRT’s net earnings are up by 32% yoy to S$77.5m on top line growth of 6.4% to S$391m. Revenue and profitability were led by core MRT operations, which saw revenue grew by 5.7%, driven by higher ridership and fares, with EBIT expanding by 15%. There were also growing contributions from the rental and advertising segments.
Recommendation
We have raised our earnings estimates for FY08 and FY09 by 12% and 11% respectively to factor in SMRT’s tight cost management. As a result, we have also raised our DPS forecast for SMRT (based on 80% payout) to 7.5cts net and 8cts net for FY08 and FY09 respectively.
On the back of our higher DPS estimates, we have raised our target price marginally to S$1.78, based on a target net yield of 4.5% for FYE Mar ’09. We maintain our HOLD call.
SMRT has declared an interim dividend of 1.75cts net, compared with c. 1.25cts net a year ago.
SMRT – BT
More passengers drive SMRT Q2 profit up 25.3%
SUBWAY operator SMRT Corp yesterday said that its net profit rose 25.3 per cent in the three months to September as a jump in passengers offset higher fuel and electricity costs.
SMRT said that its revenue from trains and buses is expected to be higher in its third quarter due to passenger growth, despite its failure to secure permission to raise train fares from October.
SMRT, which also operates buses and taxis, posted $39.5 million in fiscal second-quarter net profit compared with $31.6 million a year earlier. Its revenue rose 5.2 per cent to $197.3 million.
The firm said that it will pay an interim dividend of 1.75 cents per share, up from 1.5 cents last year.
Passenger use of SMRT trains for the second quarter rose 6 per cent to 116.8 million compared with the same period a year ago, with revenue from the use of its trains up 5.7 per cent to $108 million.
But fuel and electricity charges increased almost 26 per cent to $22.4 million, the company said in its financial statement.
With no adjustment in train fares, SMRT has to fully absorb a two percentage points increase in the Goods and Services Tax (GST) and a 1.5 percentage point increase in employers’ Central Provident Fund (CPF) contributions. This could amount to an annual cost of $11 million, according to Goldman Sachs in a Sept 12 report.
The Public Transport Council last month rejected SMRT’s application to raise train fares, citing the company’s return on total assets of 11.4 per cent that was much higher than that of other transport operators in Singapore and the region. — Reuters
MPS – SGX
Distribution to SGX listed unitholders
On 18 September 2007 the Directors of MacarthurCook Fund Management Limited, the Responsible Entity for the MacarthurCook Property Securities Fund, announced the
distribution for the quarter ended 30 September 2007 of 2.625 Australian cents per unit.
For Unitholders on the Singapore register, this gross distribution amount is subject to Australian withholding tax of 30% on the forecast taxable distribution component. This component is estimated to be 40% of the total distribution. Accordingly, 0.315 Australian cents per unit will be withheld from the distribution and remitted to the Australian Taxation Office.
The net distribution to SGX listed unitholders of 2.31 Australian cents per unit will now be paid on 30 October 2007 at an exchange rate of 1.3144 SGD per AUD.
Source : SGX
M1 – CIMB
Margin pressure on the horizon
• In line. 3Q07 earnings of S$43.6m (+1.6% yoy) were 3% below our estimate but 6% above consensus. While there was little surprise in the results, key highlights were: 1) increased competition in prepaid and data plans; 2) cost pressure from higher call and data traffic; 3) capex guidance of S$70m, down from S$100m.
• Data plan and prepaid ARPU declined. Topline of S$200.2m (+5.8% yoy) was primarily driven by subscriber growth. ARPU actually declined for data plans (-21.3% yoy to S$31.70) and the prepaid segment (-12.6% yoy to S$15.90). We believe data plans are facing increased competition from StarHub which launched its HSDPA offering island-wide in 2Q07 while prepaid has to deal with sustained aggression from SingTel. Postpaid ARPU rose (+3.7% yoy to S$61.80) as more customers signed up for mid-tier plans.
• Rising margin pressure to persist into 4Q07. 3Q service EBITDA margin declined 340bp yoy to 46.6% on higher traffic expenses (+60.3% yoy) and leased circuit costs (+19.1% yoy). We do not expect these cost pressures to let up in 4Q07 as M1 faces increased competition from SingTel (prepaid) and StarHub (mobile broadband). We also expect A&P expenses to rise as we enter the year-end festive season and the run-up to mobile number portability.
• Capex guided lower to S$70m. This implies S$44m will be spent in 4Q07 when the construction of the cellular backhaul network commences. The backhaul project is estimated to cost S$40m-60m and should provide some relief to leased circuitcost pressure, especially from FY10.
• Maintain Neutral with an unchanged target price of S$2.40. Our target price remains based on DCF valuation (WACC 7.9%, terminal growth 1%). Our FY07 earnings estimate has been reduced by 8% to reflect higher tax assumptions (18%, based on guidance) and a 50bp reduction in our FY07 EBITDA margin estimate. While M1 remains vulnerable to competition from SingTel and StarHub, we believe downside risk should be limited by forward yields of over 9%.
M1 – BT
M1’s Q3 net profit rises 1.6% to $43.6m
MOBILEONE (M1) has reported a marginal gain of 1.6 per cent to $43.6 million in net profit for the third quarter ended Sept 30, helped by lower taxation.
Earnings per share was up 12.6 per cent to 4.9 cents.
Total revenue for the quarter rose 5.8 per cent to $200.2 million as M1 managed to sell more handphones in a very tough market where mobile subscription exceeds the population.
Operating expenses rose 8 per cent to $144 million while taxation was 7.8 per cent
Earnings before interest, tax, depreciation and amortisation margin was down to 46.7 per cent from 50.7 per cent.
Statistics from the Infocomm Development Authority of Singapore (IDA) put the country’s mobile penetration rate at 111.2 per cent in June this year, meaning the total number of handphone subscriptions far exceeds the entire local population.
M1, Singapore’s smallest listed telco, said for the first nine months, net profit increased 7.3 per cent to $133.9 million. Revenue for the nine months grew 4.3 per cent to $596.4 million.
M1 added 58,000 new customers in the third quarter to bring its total customer base to 1.467 million.
Data usage continued to grow, with non-voice services contributing 21.7 per cent to service revenue in the quarter, compared with 19.2 per cent in the same period last year.
M1 chief executive Neil Montefiore said, with mobile penetration exceeding 110 per cent, the competitive environment will remain challenging.
‘M1 will continue to innovate and enhance our service delivery to meet our customers’ total wireless communications needs while maintaining a disciplined approach to cost management. M1 will also continue to look for new opportunities for growth,’ he said.
Based on the current outlook, M1 estimates single-digit growth in net profit for full-year 2007.
It also maintained guidance for capital expenditure for full-year 2007 at $70 million.
M1 said total cash distribution for the year to be at least 80 per cent of net profit.
For the half-year, M1 had paid out a total of 7.1 cents comprising an interim dividend of 2.5 cents and 4.6 cents per share by way of a capital reduction without any share cancellation. Together, that amounted to 70 per cent of first-half net profit.