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.)