Month: May 2012
SMRT – CIMB
Watch out for falling dividends
SMRT faces intensifying headwinds from an ongoing inquiry into its service disruptions. Asset renewal will call for higher capex, while mandates for more stringent repairs and maintenance will elevate its cost structure permanently, eating into profits.
FY12 core misses expectations at 85% of our FY12 and consensus due to goodwill impairment for its bus business. We cut our FY13-14 EPS by 7-8% to incorporate higher opex. Our DCF target (WACC: 6.6%) falls accordingly. Maintain Underperform.
Cash cow no more
What surprised us was a reduction in dividends this quarter, reaffirming our suspicion that SMRT will need to lower its payouts. FY12 dividends totalled 7.45cts, below our 8.5ct forecast, which was culled from management’s earlier guidance of maintaining last year’s absolute payout. We have pre-emptively cut our payout assumptions to 60% of PATMI, lowering forward yields to less than 4%.
With a planned hike in capex for fleet expansion and asset renewal, SMRT could slip into net debt in FY13. Capex will be funded by its MTN programme and debt.
Cost pressure persists
Cashflow strains aside, SMRT continued to contend with margin erosion in 4Q12. Higher repair/maintenance costs and costlier energy erased the benefits of revenue growth from higher ridership. A S$21.7m goodwill impairment for its bus business further ate into profits, causing a 10.4%-pt slump in EBIT margins. We expect a structural increase in SMRT’s cost structure from stricter repair and maintenance mandates.
Poor prospects
Plagued by margin erosion and cashflow strains, we see no reason to own this stock. Further, dividend yields are no longer attractive. Switch to ComfortDelGro for exposure to Singapore’s land transport sector.
RafflesMed – BT
Raffles Med posts 11% gain in Q1 profits
Raffles Medical Group posted net profit of S$11.6 million in the first quarter of 2012, an increase of 10.9 per cent from the same period last year.
The Group said that the increase was due to an overall improved operating performance driven by higher patient load and patient acuity.
As at 31 Mar, the Group had a healthy cash position of S$61.1 million.
Revenue rose 13.2 per cent to S$72.9 million from S$64.4 million last year.
SMRT – BT
SMRT cuts dividend as Q4 profit drops 59%
Singapore's main subway operator SMRT Corp Ltd reported on Monday a 59 per cent drop in fiscal fourth-quarter net profit, hurt by higher operating expenses and impairment of goodwill on its bus operations.
The company earned S$13.9 million (US$11.2 million) in the three months ended March, down from S$34 million a year earlier.
Singapore Mass Rapid Transit (SMRT) declared a reduced final dividend of 5.70 Singapore cents compared with 6.75 cents a year ago.
SMRT shares have fallen around 7 per cent since it said last week it would spend S$900 million to overhaul the train system following numerous breakdowns in recent months. Part of the cost will be borne by the government's Land Transport Authority (LTA).