Author: tfwee
SMRT – UOBKH
1QFY08 : Earnings expansion driven by ridership growth
SMRT reported 1QFY08 net profit of S$37.9m, up 38.5% yoy. Revenue was up
7.8% yoy.
Revenue was up 7.8% yoy to S$194.2m. The S$14m yoy rise in revenue was primarily driven by MRT operations, which recorded a S$8.9m or 9.1% revenue rise to S$106.8m – MRT average daily ridership was up 6.9% yoy to 1.23m. Rental revenue from commercial spaces rose a sharp 18.4% yoy as a result of better yield following the redevelopment of retail space at various MRT stations. Advertising revenue surged 43.8% yoy due to increased advertising on trains, stations and buses. Taxi operations also recorded a respectable 11.4% yoy revenue increase.
Operating profit rose 27.6% or S$9.7m yoy to S$44.6m. This was due to a)
MRT operations operating profit rising S$3.7m (or 13%) yoy; b) taxi operating losses falling from S$3.2m in 1QFY07 to S$0.3m; and c) improvements in rental and advertising operating profit.
Positive outlook for revenue going ahead. SMRT expects a yoy ridership increase going forward. The consequent higher fare revenue will be partly negated by the 2 ppt increase in GST effective 1 Jul 07. Revenue from taxi is also expected to rise due to a larger average hired-out fleet. SMRT management expects to record S$8m retail space rental revenue increase for FY08. However, expenses are expected to be higher due to more scheduled repairs and maintenance and increase in employers’ CPF contribution by 1.5 ppt effective 1 Jul 07.
Earnings forecasts raised marginally. We have raised our FY08 net profit forecast by 11% to S$131.1m, to reflect the anticipated stronger FY08 ridership figures for MRT, LRT and buses.
Our target price for SMRT is S$2.10. This comprises the following: a) S$1.55 for existing operations (which has factored in cannibalisation from the 2010 commencement of Circle Line operation), b) S$0.17 for the Circle Line, and c) S$0.38 value enhancement assuming the land transport review will lead to one operator running all rail and bus operations in Singapore. If the land transport review leads to a model of one-rail operator and one-bus operator, then S$1.91
would be a fairer value. While the market continues to speculate on the recommendations of the land transport review, we believe the bullish sentiment could bring SMRT’s share price closer to our more optimistic valuation.
SMRT – BT
SMRT Q1 profit rises 38.5% to $37.94m
LOWER costs and higher revenue from its trains and buses helped boost SMRT Corp’s net profit for the first quarter ended June 30 by 38.5 per cent to $37.94 million compared to the same period last year.
SMRT, which runs Singapore’s biggest rail network, said Q1 revenue rose 7.8 per cent to $194.19 million mainly because of an increase in passenger numbers on the trains and buses, a better hired-out rate for its taxi fleet, and higher turnover from advertising and rental.
Cost increases were much lower than the growth in revenue, as staff costs were less than expected, and repairs and maintenance for trains were delayed. But total operating expenses still rose $2.1 million or 1.4 per cent to $153.3 million due to higher energy costs and other operating expenses.
Higher electricity costs for trains were offset by stronger MRT revenue, which grew $8.9 million, or 9.1 per cent, to $106.8 million. This was thanks to average daily passenger numbers rising 6.9 per cent to 1.2 million and, to a smaller extent, the fare increase from Oct 1, 2006. Operating profit grew 13 per cent to $32.0 million.
Electricity and diesel costs rose by $3.6 million, or 19.7 per cent, to $21.8 million.
Bus revenue inched up 3.3 per cent to $48.3 million, resulting in an operating profit of $500,000 compared with a loss of $500,000 in the same quarter last year.
Taxi revenue improved by 11.4 per cent to $17.9 million and the operating loss narrowed to $300,000 compared with a loss of $3.2 million in the corresponding quarter.
Staff and related costs were down $2.2 million or 3.4 per cent to $62.4 million mainly because of the deconsolidation of Transit Link’s staff cost.
Earnings per share rose to 2.5 cents from 1.8 cents in the same quarter last year. The group’s net tangible asset per share was 42 cents, up from 39.6 cents three months earlier.
SMRT said it expects Q2 operating expenses to be higher than the same period last year because of more scheduled repairs and maintenance and the rise in employers’ CPF contribution by 1.5 percentage points from July 1. Electricity costs are also expected to go up and diesel prices likely to remain volatile.
M1 – Phillip
Q2 FY07 Results
Net profit continued to rise. For Q2 FY07, M1 reported net profit of S$40.6m (+10.0% yoy) and revenue of S$199.8m (+4.0% yoy). The increase in revenue was due to service revenue growth as the customer base increased by 181,000 on a yoy basis to 1,409,000. In fact, the increases in revenues from mobile telecommunications services (+6.2 yoy) and international call services (+13.1 yoy) more than offset the decline in handset sales (-16.5% yoy). The lower corporate tax rate of 18% also contributed to the increase in net profit.
On a half-year basis, revenue of S$396.2m was still 3.5% better yoy while 1H06 net profit of S$90.3m was 10.3% higher.
M1 remained attractive as a dividend play as it announced dividend distribution and capital reduction. In line with its intention to maintain a pay-out of at least 80% of net profit after to shareholders for FY07, M1 proposed to an interim dividend of 2.5 cents per share and a capital distribution of 4.6 cents per share without share cancellation.
Outlook for FY07. M1 estimated a single digit growth in profit after tax for FY07 barring unforeseen circumstances. In the postpaid segment, M1 expected an increase in customer base due to M1 broadband due to the simple “Plug & Play” devices and competitive price plans. Due to the launch of 3G Entertainment Buffet and the joint promotion of MeTV as well as new 3G and HSDPA handsets, it would likely see an increase in revenue. However, the prepaid segment remained competitive as a result of increased competition in the market and reduced tariffs by all operators.
M1, as part of the consortium with Hong Kong Broadband Pte Ltd, continued to participate in the IDA’s ongoing Request for Proposal process for the Next Generation Broadband Network and the results of the bid would be known by end 2007.
Maintain Hold with fair value raised to S$2.38. We expected FY07 net profit to increase by 9% yoy and FY08 net profit to gain by 5% yoy. The customer base and resulting revenue were likely to improve as the Singapore economy was expected to grow in 2007 and 2008. There would also be demand from new customers as the government continued to attract foreign investors and immigrants. M1 remained a hold as growth in revenues and profits were likely to be limited due to its focus on the domestic market. The increase in DCF-based fair value from 2.21 to 2.38 was to reflect the upgrade in FY07 and FY08 earnings.
M1 – OCBC
Good 2Q performance
Good results due to lower costs and better ARPU. MobileOne (M1) delivered a good set of 2Q07 results. Revenue came in at S$199.8m (+1.7% QoQ, 4.0% YoY) with net profit for the quarter at S$40.6m (-19.0% QoQ, +10.0% YoY). The reason for the sequentially decline is due to a positive tax adjustment in 1Q07 from the change in corporate tax rate to 18%. Excluding the one-off tax adjustments (i.e. at pre-tax level), M1’s 2Q07 pretax profit came in at a strong S$50.4m, +10.0% QoQ and 7.2% YoY. The stronger profitability is also reflected by the EBITDA improvement to S$81.9m, +7.5% QoQ and 6.0% YoY. The better operating performance appears to be driven by revenue growth and lower operating expenses.
Post-paid segment star. Over the last quarter, M1 saw 31k increase in the number of subscribers – 14k new prepaid and 17k new postpaid customers. However, even though prepaid had more customers and MOU increased, its revenue continue to fall a further 3.3% QoQ. This in turn led to ARPU for prepaid falling 5.3% QoQ to S$16. The poor performance for prepaid was probably due to aggressive promotions by M1’s competitors and the situation is not expected to lessen anytime soon. But on a positive note, M1’s postpaid segment saw revenue growth of 3.6% QoQ with ARPU improvement of 2.6% QoQ to S$62.2, neutralizing the revenue decline from prepaid, giving an overall mobile revenue improvement of 2.9% QoQ.
Number portability delayed. In the results, M1 also revealed that the mobile number portability initiative by the regulators has been delayed by about 6 months. This in turn is likely to delay any competitive action by players to a later date. This could possibly explain the lower acquisition cost (down 5.7% QoQ) and retention cost (down 12.3% QoQ) incurred by M1 over the last quarter.
7.1 cents payout; maintain HOLD. In the 1H07, M1 has declared an interim dividend of 2.5 cents plus 4.6 cents coming from a capital reduction. The total payout of 7.1 cents translates to a payout ratio of 70% and investors will thus enjoy an interim yield of 3.3%. Finally in light of the better operating performance, M1 is also guiding a single-digit PATMI improvement versus previous guidance of a stable operation. We maintain our S$2.33 fair value and our HOLD rating.