Category: SMRT
SMRT – BT
SMRT Q3 profit slips to $39.2m
Impairment of goodwill among factors cited; Q3 revenue up 2.6%
THE impairment of goodwill, the fare reduction package and higher staff and repair and maintenance costs caused SMRT Corp’s net profit to slip 4.8 per cent to $39.2 million for the third quarter ended Dec 31, 2009.
But Q3 revenue inched up 2.6 per cent to $224.7 million on higher train ridership, rental revenue and fees from overseas projects.
SMRT, which runs Singapore’s biggest rail network, as well as a smaller fleet of buses and taxis, said Q3 operating profit was $1.3 million lower at $49.2 million. Excluding the impairment of goodwill, which was allocated to the bus operations, Q3 operating profit would have been $5.4 million higher compared with the year-ago period.
SMRT said the $6.6 million impairment of goodwill arose because the long term bus ridership growth trend is expected to decline as the rail network expands. The increase in transfer rebates will also lead to shorter bus trips.
Other Q3 expenses include staff and related costs, which rose 7.9 per cent to $72.8 million, and repair and maintenance costs, which were 18.9 per cent higher at $18.9 million. But electricity and diesel costs were down 10.2 per cent to $27.1 million.
In the third quarter, revenue from train operations rose 1.8 per cent to $121.8 million, thanks to higher ridership from the North-South and East-West lines, plus contributions from the Circle Line Stage 3, although this was partially offset by reduced fares.
Total Q3 MRT ridership grew 5.8 per cent to 137.3 million. Operating profit increased 9.0 per cent to $37.2 million due to the higher revenue and other operating income, but these were weighed down by higher repair and maintenance, and staff costs.
Q3 revenue from bus operations fell 4.8 per cent to $48.8 million mostly because of the lower average fare. The bus business suffered a higher operating loss of $1.9 million versus $1.4 million a year earlier due mainly to this lower revenue, as well as higher repair and maintenance expenses, although these were offset by lower diesel costs.
Taxi rental revenue rose 2.3 per cent to $17.8 million in Q3 on improved hired-out rates, and taxi operations posted an operating profit of $0.9 million against an operating loss of $0.2 million in the previous corresponding quarter.
One strong result was the Q3 revenue from engineering and other services, which shot up 40.5 per cent to $11.2 million. Operating profit jumped 231.6 per cent to $3.6 million on increased contributions from consultancy and overseas projects.
Q3 earnings per share fell from 2.7 cents to 2.6 cents. No dividend will be declared for Q3.
For the first nine months, net profit climbed 13.0 per cent to $140.2 million while year-to-date revenue crept up 1.2 per cent to $670.0 million. From April to December, earnings per share rose from 8.2 cents to 9.2 cents.
‘SMRT has performed reasonably well for the first three quarters of the financial year 2010,’ said SMRT president and chief executive Saw Phaik Hwa.
‘However, profitability will continue to be impacted by the volatility in diesel prices, the fare reduction package ending June 2010 and the ramp-up costs to prepare for the progressive opening of the remaining Circle Line stations.’
Land Transport – AmFraser
4Q09: Improved ridership momentum
• Total rail ridership grew 4% YoY in 2009, boosted by better 6% YoY growth in 4Q09. 4Q was the highest quarter in 2009, enjoying 177.2 million rides by commuters. In contrast, 3Q was the peak quarter – with 169.4 million rides – in 2008. In total, commuters took 676.8 million rail trips in 2009.
• MRT ridership fared a better 4% YoY growth in 2009 against 3% YoY growth in LRT ridership. LRT ridership accounts for an insignificant 4.9% of total ridership. Four MRT lines – North-South Line (NSL), East-West Line (EWL), North-East Line (NEL) and partially-opened Circle Line (CCL) enjoyed a combined 643.8 million trips by commuters. Three LRT lines – Bukit Pangjang, Sengkang and Ponggol – saw 33 million trips for the year.
• For 2009, ComfortDelGro’s (CD) rail ridership fared better than SMRT, despite reverse in 4Q09. Through 75.3%-owned Singapore Bus Service Transit (SBST), CD’s only MRT line (NEL) and two feeder LRT lines (Sengkang and Ponggol) to NEL, saw a combined 6% YoY growth to 135.6 million trips in 2009. LRT accounts for 12% of this. In 4Q09, CD’s rail ridership grew 5% YoY to 35.7 million.
• Pick up in momentum for 4Q09 at SMRT pulls rail ridership growth to 4% YoY for 2009. SMRT saw a combined 137.3 million rides on its three MRT lines in 4Q09, representing 6% YoY growth, higher than the 2-3% YoY growth in the earlier quarters.
• Overall, incremental benefits from new Circle Line has not flowed through in 2009. Despite opening of a new MRT line since May 2009, 4% YoY growth in rail ridership for 2009 was much lower than the 12% YoY growth for 2008. As only one out of five stages of CCL is in operation so far, and CCL is more of a connecting line (an orbital line) to improve travel times and convenience, we believe more incremental benefits will flow through in the longer term from luring more commuters to take public transport when later stages of CCL are progressively opened. At the same time, while a slower economy dampened rail rides to some extent in 2009, a continued growth (+0.3% YoY) in car population also had an impact.
• In public scheduled bus services, CD’s dominant bus operations continued to fare poorer than SMRT’s in 4Q09. Overall bus ridership fell 1% YoY in 2009 to 1,115.5 million trips. SBST saw an improved flat 4Q09 over year ago which helped bring its full year to a 2% YoY fall to 827.9 million rides. SMRT also saw an improved 1% YoY growth in 4Q09, which helped bring full calendar year to a flat performance over 2008.
• On balance, ridership numbers released till December 2009, bodes better for CD. While CD’s bus ridership for FY2009 is a fall from 2008, this came in 1% higher than our forecast. At the same time, CD’s rail ridership came in 0.4% below our FY2009 forecast. Singapore bus accounts for a larger 20% of CD’s revenues, while rail accounts for a smaller 4%.
• SMRT’s 3QFY10 (YE March) reported MRT ridership of 137.3 million is 1% lower than our estimate. But on upside, bus ridership totalling 71.7 million (Dec 2009 estimated) is 2% above what we had factored in. However, the net effect is on the downside as MRT operations contribute 54% to revenues while bus accounts for 22%.
• Preview: Modest cut to SMRT’s FY10 estimates possible – but would not likely have drastic impact on rating. SMRT reports 3QFY10 (March) results 27 January after trading hours. CD reports FY09 (Dec) on 10 February. We reckon minor adjustments on ridership revision per se, could represent a 2% downward bias to SMRT’s fFY10 (March) earnings.
• Positive note for SMRT, we will start to see maiden contributions from Shenzhen ZONA Transportation Group in 3QFY10. The acquisition of ZONA – its first overseas foray in public transport services – was completed on 30 October 2009. While early contributions is insignificant in the near-term, SMRT expects this to be material within five years.
• CD still presents 15% upside to fair value of S$1.89 – maintain BUY rating. SMRT has appreciated 9% on our buy rating since our last report on 2 November 2009. Our current rating pends our results review report.
SMRT – BT
More Circle Line stations to open in April
ELEVEN more Circle Line (CCL) stations will begin operations on April 17, Transport Minister Raymond Lim announced yesterday.
These stations, from Dhoby Ghaut to Bartley, are part of the 10.8 kilometre long second phase of the new 33.3 km MRT line. The stations – Tai Seng, MacPherson, Paya Lebar, Dakota, Mountbatten, Stadium, Nicoll Highway, Promenade, Esplanade, Bras Basah and Dhoby Ghaut – will join the five stations from Bartley to Marymount, which were opened on May 28 last year.
About 200,000 people are expected to use the 16 stations – from Dhoby Ghaut to Marymount every day.
‘This is a significant milestone in the expansion of our rail network,’ said Mr Lim, explaining that the direct connection provided by the CCL will cut down travelling time for commuters.
For example, those travelling from Simei to Bishan currently take 46 minutes to travel by MRT. With the CCL, it will require 31 minutes, or a 33 per cent time savings.
The CCL is an orbital line that links to existing train lines to reduce travelling times to suburban areas by bypassing the city centre. When the $6.7 billion line is fully completed, up to 500,000 people are expected to use it daily.
Passengers travelling from the eastern parts of Singapore can use the new Paya Lebar Interchange Station to bypass the busy City Hall and Raffles Place interchanges to get to the city and northern parts of Singapore. Those travelling from the north and north-east commuting to the city and the east will also benefit from the CCL.
Mr Lim added that the rest of the 29 CCL stations will open in 2011. He said that opening the CCL in phases is not cost-effective, but it is good from a commuter perspective.
Earlier, he had visited the award-winning Stadium CCL Station, which is designed to accommodate large crowds from the nearby facilities, before travelling three stops north to Paya Lebar Station
The Paya Lebar Station connects to the East-West Line and is the first interchange station to integrate above-ground and underground lines.
Commuter connectivity between the new CCL station and the East-West Line station is helped by two wide passageways.
Mr Lim noted that the stations paid ‘a lot of attention to detail’ and cited the artwork on the wall, which reflects the history of the surrounding area. In the Paya Lebar Station’s case, there are illustrations of pigs because of the pig farms that used to be located there.
He also thanked those living in the areas along the CCL for putting up with the inconvenience during the construction of the line.
SMRT – DB
Ridership growth momentum to continue
Nov09 rail ridership figures continued to show a gradual pick up in rail ridership on a 3M rolling basis (+3.8% YoY). Bus ridership grew by 1.7% YoY in Oct09, a turnaround from -0.3% YoY in Sep09, -1.0% YoY in Aug09 and -1.2% YoY in Jul09.
Rail ridership is up 3.0% YoY vs our forecast of 3.5% YoY and bus ridership is down 0.4% YoY vs. our forecast of -0.5% YoY. To date, both rail and bus ridership is tracking in line with our expectations.
We believe that the overall ridership trend for the sector should continue to improve, helped by the recovery in the economy and the opening of two integrated resorts in the 1Q10. Our top pick for the sector is SMRT. Our TP of S$2.00 implies potential total return of 16%. SMRT also offers a defensive yield of 4.7%.
SMRT – Phillip
2nd Quarter FY2010 Results
Marginal year-on-year topline with significant bottomline increase. SMRT Corp Ltd announced Group revenue for the second quarter of FY10 (“2QFY10”) of $229.4m. This represents a marginal increase of 1.1% from a year ago due mainly to higher revenue with the operation of Circle Line Stage 3, increased rental revenue and higher revenue from overseas projects, partially offset by fare reduction. Net profit for 2QFY10 came in at $52.8m, an increase of 24.1% compared to the same period last year. The significant increase was on the back of higher revenue and other operating income, Government Budget measure, lower energy costs and lower other operating expenses. The results are mainly within our expectations and we maintain our HOLD call with no changes in our fair value estimate of $1.89 as from the previous last done price of $1.73, this represents an upside of 9.25%.
Train Revenue Segment. Total Ridership for the quarter grew by 2.2%. Revenue increased marginally from $122.8m to $123.3m or 0.4% year on year. This was mainly due to higher average daily ridership and the commencement of the Circle Line Stage 3, partially offset by the fare reduction. EBIT increased from $36.1m to $38.7m or 7.0% due mainly to higher revenue and other operating income. Revenue from LRT operations fell by about 5% to $2.2m with EBIT declining approximately 28% to $0.1m.
Bus operations Revenue Segment. Bus operations posted a 4.6% decline to $51.0m in 2QFY10 due mainly to lower average fare and average daily ridership. Total ridership declined by 0.7% year on year. However, lower diesel costs improved bus operations EBIT, resulting in an operating profit of $1.8m compared to an operating loss of $1.1m a year ago.
Taxi Revenue Segment. Revenue in this segment saw a decline of 2.6% to $17.9m for 2QFY10 due mainly to a smaller average hired-out fleet. As a result of the smaller average holding fleet, operating expenses were lower and thus resulting in an operating profit of $0.8m compared to an operating loss of $0.5m in the same period last year.
Rental Revenue Segment. Rental revenue saw another quarter of good performance growing by 13.1% from $14.2m to $16.1m year on year. This was mainly due to increased rental space, a total of 29,225 sqm lettable space at the end of 2QFY10, and better yield. EBIT grew by 10.8% from $11.5m in 2Q09 to $12.7m this quarter.
Advertising Revenue Segment. The weak economic environment saw advertising revenue decline 9.8% to $5.4m with EBIT declining 10.8% to $3.4m.
Engineering and Other Services Segment. This segment saw an increase in revenue by 38.0% to $13.4m and EBIT grew almost five-fold to $5.5m on the back of increased consultancy revenue and higher fees from overseas projects.
The Group has fixed the rates for their electricity contract for the next 12 months from 1st October 2009 to 30th September 2010. The rates will be 11% higher than the previous six-month contract, which ended on 30th September 2009.
The $150m fixed rate notes issued recently in October 2009 should see Finance costs increasing. Total debt will return to current levels when the existing notes of $100m and $50m are repaid in December 2009 and January 2010 respectively.
The Group should be facing a challenging environment for the remainder of its financial year with the fare reduction package ending only in June 2010 as well as higher operating expenses due to increase in ramp-up costs for the remaining circle line stations, volatile diesel prices, higher electricity tariff rates, expected increase in headcount and therefore staff related costs and higher scheduled repairs and maintenance for Train. The Jobs Credit Scheme will also be at stepped down rates for six months from January to June 2010.
Our fair value estimate remains at $1.89 as most of the expected increase in operating expenses has already been factored in previously. With the last traded price of $1.73 representing a 9.25% upside from our target price, we reiterate a HOLD call based on our stock selection system.