Author: tfwee
SMRT – Phillip
Within Expectations
2Q Results. SMRT reported 2Q revenue of S$197.3m (+5.2% yoy) and net profit of S$39.5m (+25.3% yoy). The growth in revenue was due to higher ridership, improved taxi average hired-out fleet and strong contributions from rental and advertising.
In view of the excellent performance, SMRT announced an interim ordinary dividend of S$26.5m or 1.75 cents per share.
Performances by various businesses. SMRT registered growth in fare revenues from MRT (+5.7% yoy) and LRT (+4.4% yoy) operations while the buses operation posted minor growth in revenue (+0.7% yoy). The increase in average daily ridership resulted in the growth in revenues from the operations.
Moreover, for non-fare operations, there was double digit revenue growth from taxis (+12.3% yoy), rental (+12.8% yoy) and advertising (+24.6% yoy). The strong performances from taxis was due to the higher average hired-out rate at 90.2 percent in 2Q. Meanwhile, the increase in rental space and better yield caused the growth in rental. Furthermore, the increase in advertising on trains and stations resulted in better advertising sales.
However, revenue from engineering and other services declined (-11.7% yoy) due to the deconsolidation of Transit Link.
FY 08 Outlook. Management remains optimistic about its business in 2008. It expects growth in revenues from trains and bus operations as well as taxis, rental and advertising. Nevertheless, other operating income is likely to be lower in FY 08 as there were contributions from expired farecards in FY 07.
Maintain HOLD recommendation, target price raised from S$1.32 to S$1.70. SMRT has posted financial results within our expectations. Moreover, it continues to register increases in revenues and profits. This is a defensive stock for investors who would like to hold for payment of dividends. Based on our discounted cash flow model, the fair value is raised to S$1.80 to reflect the progressive growth in cash flow from operations.
Thomson Medical – UOBKH
A celebration of life
Target audience: women and children. Thomson Medical Centre (TMC) focuses on specialist care for women and children by offering a comprehensive range of services in obstetrics & gynaecology and paediatrics. Its flagship 190-bed Thomson Medical Centre at Thomson Road was established in 1979. The hospital generates recurrent revenue from the provision of inpatient services such as accommodation, nursing procedures and use of facilities like operating theatres and labour suites.
TMC provides assisted reproductive programmes, such as in-vitro fertilisation, Intrauterine Insemination and Intracytoplasmic Sperm Injection, through Thomson Fertility Centre. Subsidiary Thomson Pre-Natal Diagnostic Laboratory helps parents in early detection of chromosomal abnormalities like Down Syndrome and Thalassaemia. The company also operates a network of seven women and children clinics in Singapore.
More babies and better margins. Deliveries at TMC reach record of 7,665 babies in FY07, an increase of 6.9%. This is achieved through promotion of the Thomson Medical brand, increased patient load seen by tenant specialists and referrals from Thomson Women’s Clinics. TMC has also recognised S$0.35m consultancy fee in FY07 for the hospital consultancy project in Vietnam. Net margin has expanded from 14.6% in FY06 to 18.1% in FY07 due to improved operating efficiencies and increased patient volume. This was achieved despite closure of two wards for renovation.
Upgrading Thomson Medical Centre. TMC plans to increase the number of tenant specialists and has completed the renovation of Level 3 and Level 5 inpatient wards to cater to increased patient volume. Level 5 is positioned as a premium ward offering differentiated services. TMC plans to add another two operating theatres for increased volume of surgical procedures. TMC has 3,200 members under the First Born Incentives (FBI) and Subsequent Born Incentive (SBI) programmes. Members, who are mothers-to-be, are entitled to retail and medical services privileges. These programmes build brand loyalty.
Expanding Specialised Services. Thomson Fertility Centre sees increased patient load both locally and regionally. Foreign patient numbers has doubled over the past year. TMC and partner Hanh Phuc will work together on an exclusive basis to develop women and children hospitals in Vietnam. . It is also exploring opportunities for providing fertility treatments in Vietnam. TMC will set up another Thomson Women’s Clinic in Ang Mo Kio Hub in 1H08.
Annual birth rate in Singapore increased 825 or 2.2% to 38,317 in 2006. The country needs 60,000 babies a year to replace the population. The Government is reviewing marriage and pro-creation incentives, such as increasing subsidies for child care services, extending maternity and paternity leave and instituting better work-life balance in companies, to encourage Singaporeans to have more babies.
TMC has stated dividend policy of 50% payout on net profit. The company paid total dividend of 2.5 cents/share for FY07, representing dividend yield of 3.6%.
ComfortDelgro – BNP
ComfortDelGro delivered a 15% y-y increase in 3Q07 net profit. The group’s foray into the land transportation services overseas offers potential for significant earnings growth. We like the stock for its accretive overseas operations. We maintain our BUY rating and TP of SGD2.50.
Growth within expectations 3Q07 earnings in-line
ComfortDelGro’s earnings were in-line with our expectations.
The 3Q07 net profit rose 15% y-y to SGD59m on the back of strong contribution from its overseas operations. Growth was broad-based, with all major operations chalking up increases in turnover, in particular the group’s bus operations. EBIT gained 14.4% y-y to SGD93m while EBIT margin was up to 12.1% in 3Q07 from 11.2% in 3Q06.
Overseas bus operations continue to shine
The group’s bus revenue and EBIT rose 10.6% y-y and 12.6% y-y, respectively. Weaker Singapore bus EBIT was offset by stronger overseas bus EBIT in both UK and Australia, which grew by 37.4% and 117.5% y-y, respectively. The surge in overseas bus EBIT was largely due to higher contracted rates and higher mileages operated in both UK and Australia. EBIT contributions from its overseas bus operations rose to 80% in 3Q07, from 60% in 3Q06.
Taxi and rail operations posted good growth
Taxi revenue and EBIT rose 6% y-y and 28.4% y-y, respectively. The sterling performance was largely boosted by stronger Singapore operations, which saw better corporate accounts and higher rentals from new Sonata taxi fleet. As for the group’s Singapore rail operations, we expect to see further improvement in view of the steady increase in rail ridership. The group posted an operating profit of SGD2.3m in 3Q07, up 15% y-y.
Potential to unlock more value from overseas – BUY
In our view, the group’s overseas operations will remain key to its overall earnings growth. The recent spikes in oil prices had minimal impact on earnings as energy and fuel costs account for only 8.4% of total operating expenses. We have kept our FY08 earnings estimate unchanged. We have arrived at our DCF-derived target price assuming a WACC of 6.6% and a terminal growth rate of 2%. Our target price is based on 2008 P/E multiple of 20x, in line with that of major transport operators in the region. We maintain our BUY rating and target price of SGD2.50.