Author: kktan
SMRT – BT
SMRT posts 8.9% fall in Q1 net profit
Company cites higher energy and staff and related costs
HIGHER energy costs were instrumental in SMRT Corp’s net profit falling 8.9 per cent to $34.8 million for the first quarter ended June 30, 2011.
Singapore’s biggest rail operator was also affected by higher staff and related costs, repairs and maintenance, and other operating expenses, although these were partially offset by lower depreciation.
Operating profit was 8.1 per cent lower at $42.4 million from a year ago even as Q1 revenue increased 7.5 per cent to $253.1 million mainly on higher rail and bus ridership.
The company also enjoyed higher contributions from the Circle Line, stronger taxi rental revenue as well as higher rental and advertising revenue, even as these were offset by a lower average fare for MRT and buses.
Earnings per share fell to 2.3 cents from 2.5 cents previously. No dividend will be declared for Q1.
Revenue from train operations rose 4.2 per cent to $135.0 million on higher ridership but operating profit slipped 18.6 per cent to $22.6 million mainly due to increased energy costs and staff and related expenses.
The group’s electricity and diesel costs in Q1 had surged 32.7 per cent to $40.0 million, while staff and related costs rose 10.9 per cent to $84.6 million with the bigger headcount for Circle Line operations, increased train runs and the absence of Jobs Credit.
As for bus operations, Q1 revenue rose 3.4 per cent to $54.3 million mainly on higher ridership. But operating losses ballooned to $4.4 million from $770,000 in the corresponding period the previous year due to higher diesel cost.
Taxi operations fared better with rental revenue up 15 per cent to $21.0 million mainly with a larger average hired-out fleet.
But operating profit was down 36.8 per cent to $414,000 from $655,000 previously because of higher depreciation and insurance costs.
Q1 rental revenue was stronger, increasing 10.8 per cent to $19.2 million and enjoying a 10.9 per cent hike in operating profit to $15.0 million.
Meanwhile, revenue from SMRT’s engineering and other services jumped 54.2 per cent to $14.0 million with the higher revenue from fleet maintenance and diesel sold to taxi hirers.
This included payment of $0.7 million received for Palm Jumeirah and recognised as revenue in the quarter.
Engineering’s Q1 operating profit of $3.3 million is in contrast to the operating loss of $1.1 million in the previous corresponding quarter’s, due mainly to the fact that no revenue was recognised in Palm Jumeirah while costs for the operation and maintenance there continued to be incurred.
SMRT shares closed half a cent higher at $1.88 yesterday.
July 2011
Results Announcement
- 12 Jul 11 : SPH (Q311) – EPS 7ct (todate 18ct)
- 14 Jul 11 : M1 (Q211) – EPS 4.7ct (todate 9.4ct) ; Div 6.6ct
- 25 Jul 11 : STI ETF (1H11) – Div 4.5ct
- 26 Jul 11 : SATS (Q112) – EPS 3.8ct
- 27 Jul 11 : SingPost (Q112) – EPS 2.042ct ; Div 1.25ct
- 27 Jul 11 : SMRT (Q112) – EPS 2.3ct
- 10 Aug 11 (AM) : MIIF (1H11)
- 11 Aug 11 : SBSTransit (1H11)
- 12 Aug 11 : ComfortDelgro (1H11)
- 4 Aug 11 : StarHub (Q211)
STI = 3189.85 (-3.69)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SPH |
FY10 (Aug) |
31 |
27 |
$3.95 |
6.835% |
12.74 |
Interim 7ct ; Final 9ct + 11ct (Special) |
|
SingPost |
FY11 (Mar) |
8.369 |
6.25 |
$1.10 |
5.682% |
13.14 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
STI ETF |
Jun-11 |
— |
4.5 |
$3.22 |
2.795% |
— |
Jun11 4.5ct ; Dec10 3.5ct |
|
SATS |
FY11 (Mar) |
17.4 |
17 |
$2.53 |
6.719% |
14.54 |
Final 6ct + Special 6ct ; Interim 5ct |
|
ST Engg |
FY10 (Dec) |
16.21 |
14.55 |
$3.00 |
4.850% |
18.51 |
Final 4ct + 7.55ct (Special) ; Interim 3ct |
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY10 (Dec) |
17.63 |
8.80 |
$1.87 |
4.718% |
10.58 |
Interim 4.5ct ; Final 4.3ct |
|
ComfortDelGro |
FY10 (Dec) |
10.95 |
5.50 |
$1.44 |
3.819% |
13.15 |
Interim 2.7ct ; Final 2.8ct |
|
SMRT |
FY11 (Mar) |
10.6 |
8.5 |
$1.86 |
4.582% |
17.50 |
Interim 1.75ct ; Final 6.75ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY11 (Mar) |
24.02 |
25.8 |
$3.31 |
8.157% |
13.78 |
Interim 6.8ct ; Final 9ct + Special 10ct |
|
M1 |
FY10 (Dec) |
17.5 |
17.5 |
$2.62 |
6.679% |
14.97 |
Interim 6.3ct ; Final 7.7ct + Special 3.5ct |
|
StarHub |
FY10 (Dec) |
15.34 |
20 |
$2.85 |
7.018% |
18.58 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H11 (Mar-11) |
A4.0 (Gross) |
$1.205 |
8.829% |
A$0.89 |
2H11 A4.0ct ; 1H11 A4.0ct |
|
MIIF |
2H – Dec10 |
1.50 |
$0.565 |
5.310% |
$0.82 |
2H10 1.5ct ; 1H10 1.5ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.3298) fm Yahoo
NOTES :
- Mkt Price is as on 28-Jul-11
- SingPost : Q112 (Jun11) – 1.25ct
- M1 : 1H11 (Jun) – Interim 6.6ct
- SATSvcs : Q411 (Mar11) – Final 6ct + Special 6ct ; Q211 (Sep10) – Interim 5ct
- SPAus : 2H11 (Mar11) – A4ct (before tax) / A3.7721ct (after tax) ; 1H11 (Sep10) – A4ct (before tax) / A3.7772ct (after tax)
- SingTel : 2H11 (Mar11) – Final 9ct + Special 10ct ; 1H11 (Sep10) – Interim 6.8ct
- StarHub : Q111 (Mar) – 5ct
- SMRT : Q411 (Mar) – Final 6.75ct ; Q211 (Sep10) – Interim 1.75ct
- SPH : 1H11 (Feb) – 7ct
- MIIF : 2H10 (Dec) – 1.5ct ; 1H10 (Jun) – 1.5ct
- ST Engg : 2H10 (Dec) – 4ct (Final) + 7.55ct (Special) ; 1H10 (Jun) – 3ct
- ComfortDelgro : Q410 (Dec) – 2.8ct ; Q210 (Jun) – 2.7ct
- SBSTransit : Q410 (Dec) – 4.3ct ; Q210 (Jun) – 4.5ct
- StarHub : FY11 Div Guidance – 5ct/Q
SingTel – CIMB
Another step in asset monetization
Selling ducts and manholes to CityNet
SingTel took another step towards monetising its passive assets of ducts and manholes that are currently being used by OpenNet and its existing copper network. It will sell these assets and seven exchange buildings to CityNet which is the trustee manager of NetLink Trust for S$1.89bn (S$0.12/SingTel share). The assets may fetch a different valuation in 2014 when SingTel is required to sell down its interest to below 25% by Apr 2014, under its agreement with the regulator. We believe SingTel will return the proceeds to shareholders. Maintain UNDERPERFORM, nevertheless, and our SOP-based target price of S$3.19, with de-rating catalysts still expected from rising competition in Australia and cost pressures in Singapore.
The news
SingTel has announced that it will be selling its ducts and manholes used by OpenNet and seven exchange buildings to CityNet, which is the trustee-manager of NetLink Trust for S$1.89bn (Figure 1). The sale consideration will be financed by a loan from SingTel to CityNet and the issue of units of NetLink to SingTel. In addition, SingTel will:
• Pay about S$20m p.a. to use NetLink’s ducts for SingTel’s existing copper lines. This is for 25 years, with an option to renew for another 25 years.
• SingTel expects to pay another S$12m p.a. to lease space in the seven exchange buildings.
• Enter into a duct-and-manhole service agreement relating to OpenNet’s cables situated within NetLinks ducts. SingTel will pay fixed and variable charges comprising 70% of the variable charge that SingTel receives from OpenNet. The fixed charge is estimated at S$5m, S$15m and S$20m for FY12, FY13 and FY14 respectively. With effect from FY3/14, the charge is estimated at S$20m per annum. The agreement is for 25 years with an option to renew for another 25 years.
SingTel will incur additional operational and maintenance costs for NetLink which should not exceed S$20m p.a.
While SingTel is the sole holder of NetLink and retains a 100% economic interest over the business and assets, it will cease control of NetLink as CityNet will have a majority independent board of directors, and SingTel can only appoint up to 30% of the board.
Comments
Another step in asset monetisation. This development does not surprise us. It is part of the process whereby SingTel transfers its ducts and manholes to a separate company to comply with the Infocomm Development Authority’s (IDA) effective open access requirements. SingTel must sell down its interest in NetLink to less than 25% by Apr 2014.
What is new, however, is the S$1.89bn (S$0.12/share) valuation SingTel has assigned to the assets. SingTel had not indicated the valuation of these assets before.
These assets may fetch a different valuation in 2014 when SingTel is required to sell down its interest then. By that time, there could be other access seekers apart from SingTel and OpenNet, which could bolster the value of the assets. We believe SingTel is likely to return the proceeds of the selldown to below 25% to shareholders in 2014.
Positive for SingTel. We maintain that SingTel will benefit from the introduction of the next generation broadband network (NGNBN) in two ways: 1) monetisation of its passive assets; and 2) access to the nationwide fibre network that would help it level its playing field with StarHub, especially for access to residential properties.
No impact on earnings. This transaction has no impact on SingTel’s net profit as it is an internal transfer. However, revenue that it receives from the use of the ducts and manholes and all related opex will now be booked at the associate line as it no longer controls the assets.
Valuation and recommendation
We maintain our UNDERPERFORM on SingTel with an unchanged SOP-based target price of S$3.19. De-rating catalysts are still expected from rising competition in Australia, cost pressures in Singapore, and earnings dilution at Bharti from 3G start-up costs at Bharti Africa.
SingTel – CIMB
Another step in asset monetization
Selling ducts and manholes to CityNet
SingTel took another step towards monetising its passive assets of ducts and manholes that are currently being used by OpenNet and its existing copper network. It will sell these assets and seven exchange buildings to CityNet which is the trustee manager of NetLink Trust for S$1.89bn (S$0.12/SingTel share). The assets may fetch a different valuation in 2014 when SingTel is required to sell down its interest to below 25% by Apr 2014, under its agreement with the regulator. We believe SingTel will return the proceeds to shareholders. Maintain UNDERPERFORM, nevertheless, and our SOP-based target price of S$3.19, with de-rating catalysts still expected from rising competition in Australia and cost pressures in Singapore.
The news
SingTel has announced that it will be selling its ducts and manholes used by OpenNet and seven exchange buildings to CityNet, which is the trustee-manager of NetLink Trust for S$1.89bn (Figure 1). The sale consideration will be financed by a loan from SingTel to CityNet and the issue of units of NetLink to SingTel. In addition, SingTel will:
• Pay about S$20m p.a. to use NetLink’s ducts for SingTel’s existing copper lines. This is for 25 years, with an option to renew for another 25 years.
• SingTel expects to pay another S$12m p.a. to lease space in the seven exchange buildings.
• Enter into a duct-and-manhole service agreement relating to OpenNet’s cables situated within NetLinks ducts. SingTel will pay fixed and variable charges comprising 70% of the variable charge that SingTel receives from OpenNet. The fixed charge is estimated at S$5m, S$15m and S$20m for FY12, FY13 and FY14 respectively. With effect from FY3/14, the charge is estimated at S$20m per annum. The agreement is for 25 years with an option to renew for another 25 years.
SingTel will incur additional operational and maintenance costs for NetLink which should not exceed S$20m p.a.
While SingTel is the sole holder of NetLink and retains a 100% economic interest over the business and assets, it will cease control of NetLink as CityNet will have a majority independent board of directors, and SingTel can only appoint up to 30% of the board.
Comments
Another step in asset monetisation. This development does not surprise us. It is part of the process whereby SingTel transfers its ducts and manholes to a separate company to comply with the Infocomm Development Authority’s (IDA) effective open access requirements. SingTel must sell down its interest in NetLink to less than 25% by Apr 2014.
What is new, however, is the S$1.89bn (S$0.12/share) valuation SingTel has assigned to the assets. SingTel had not indicated the valuation of these assets before.
These assets may fetch a different valuation in 2014 when SingTel is required to sell down its interest then. By that time, there could be other access seekers apart from SingTel and OpenNet, which could bolster the value of the assets. We believe SingTel is likely to return the proceeds of the selldown to below 25% to shareholders in 2014.
Positive for SingTel. We maintain that SingTel will benefit from the introduction of the next generation broadband network (NGNBN) in two ways: 1) monetisation of its passive assets; and 2) access to the nationwide fibre network that would help it level its playing field with StarHub, especially for access to residential properties.
No impact on earnings. This transaction has no impact on SingTel’s net profit as it is an internal transfer. However, revenue that it receives from the use of the ducts and manholes and all related opex will now be booked at the associate line as it no longer controls the assets.
Valuation and recommendation
We maintain our UNDERPERFORM on SingTel with an unchanged SOP-based target price of S$3.19. De-rating catalysts are still expected from rising competition in Australia, cost pressures in Singapore, and earnings dilution at Bharti from 3G start-up costs at Bharti Africa.
SATS – CIMB
Margins threat from inflation, challenging aviation sector
• Turbulence ahead. We expect SATS to be swept into some turbulence ahead with headwinds arising from 1) margin squeeze from food inflation and inability to pass through costs in an environment of struggling profitability for main airline clients, and 2) the emergence of a third ground handler in Changi Airport, which could stiffen competition and further erode pricing power. At 13.7x CY12 P/E, SATS is trading slightly above its average forward P/E. A slowing aviation industry and margin pressure could spark a de-rating of its share price. We resume coverage with new forecasts, an unchanged UNDERPERFORM rating and S$2.60 target price, based on 13.1x CY12 P/E, its historical mean since 2004.
• Knock-on effects of a fragile aviation industry. With 59% of revenue derived from the aviation industry, SATS’s profitability is tied to the airline industry’s performance. We have an Underweight rating on this sector as our regional transport analyst anticipates margin pressure from falling utilisation and high fuel costs. Belt-tightening among airlines could have negative knock-on effects on service providers such as SATS, which may end up being squeezed between cost-conscious customers and high food costs.