Category: SMRT
SMRT – DBS
1Q09 results in line
Comment on Results
SMRT’s 1Q09 earnings were in line with expectations. The Group’s net profit rose by 6.2% yoy to S$40.3m on revenue growth of 11.2% yoy to S$216m. Revenue growth was primarily driven by MRT business (+8.2% to S$116m), due to higher rider-ship, as well as the rental business (+47% to S$13.8m). Higher operating profit at the MRT division (+9% yoy to S$35m) and Rental business (+51% to S$10.3m) helped offset losses at the bus division (from profit of S$0.5m to loss of S$3.3m) and taxi division (higher losses of S$1.3m compared to S$300k in 1Q08), both of which were affected by higher fuel costs.
Recommendation
Looking ahead, we expect the Group’s core MRT business to continue faring well on firm rider-ship growth, which should help to alleviate the weak performance of the bus and taxi businesses. Higher rental income on increased floor space and improved rental yields should also help to contribute to higher earnings for SMRT. Whilst earnings growth in the immediate term could be flattish as the Circle Line is being readied (Circle Line Stage 3 is expected to commence in mid 2009) and rolled-out, we continue to be positive on the long-term prospects of the Group, on higher rider-ship and greater use of trains as a mode of public transport.
Maintain BUY, TP S$2.00
SMRT – BT
SMRT’s profit in Q1 increases 6.2% to $40.3m
STRONG train ridership growth and higher rental revenue boosted SMRT Corp’s net profit by 6.2 per cent to $40.3 million for the first quarter ended June 30, 2008 compared with the corresponding period a year ago.
Group revenue in Q1 rose 11.2 per cent to $215.9 million.
Total operating expenses rose 13.1 per cent to $173.3 million due to increased staff and related costs, energy costs and other operating expenses.
But thanks to the higher revenue and other operating income, the group turned in an operating profit of $48.2 million – an 8.0 per cent improvement over the same quarter last year.
‘SMRT has continued to grow its profits on the back of strong ridership growth and increased rental revenue,’ said president and CEO Saw Phaik Hwa. ‘In the next 12 months, we will be faced with a higher inflationary operating cost environment with volatile energy prices. We will continue to manage costs and focus on increasing revenue.’
Earnings per share rose to 2.7 cents from 2.5 cents year-on-year. No dividend was declared for the first quarter.
SMRT operates Singapore’s biggest rail network, along with a smaller fleet of buses and taxis.
Its Q1 MRT revenue grew 8.2 per cent to $115.6 million as average daily ridership rose. The ridership growth, partially offset by higher staff and electricity costs, led to a 9.1 per cent increase in operating profits to $34.9 million. SMRT’s current six-month electricity supply contract ends in September but it has an option to renew it.
Q1 revenue from bus operations was up 5.3 per cent to $50.9 million but they posted an operating loss of $3.3 million due mainly to higher diesel costs.
Diesel subsidies and a rise in other operating expenses led to an operating loss of $1.3 million for the taxi division in Q1, although taxi rental revenue increased by 5.6 per cent to $18.9 million with a higher average hired-out fleet.
SMRT’s commercial activities fared better. Increased space and better rental yield from various MRT stations pushed Q1 rental revenue up 47.2 per cent to $13.8 million as operating profits grew 51.4 per cent to $10.3 million.
Meanwhile, more advertising on trains and buses and in MRT stations during the first quarter boosted advertising revenue by 5.3 per cent to $5.6 million. Operating profits also rose 12.9 per cent to $3.7 million.
Looking forward, SMRT expects the operating environment to remain challenging in the next 12 months, with the cost of electricity and diesel likely to remain high. It said that if this persists, its bus operations will continue to operate at a loss. SMRT has over 800 buses, or less than a third of market leader SBS Transit’s fleet.
Transport – BT
Through fare adjustment may negate fare hike
Transport firms cleared to apply for bus, train fare increase of up to 3%
PUBLIC transport operators’ (PTOs) revenues may be hurt despite a fare review that allows a maximum fare adjustment of 3 per cent for 2008 because of the introduction of distance-based through fares.
Yesterday, the Public Transport Council (PTC) announced that public transport operators can apply for an increase in bus and train fares of up to 3 per cent. This was arrived at after a review of the fare adjustment formula, which PTC has tweaked slightly.
The formula, unveiled in 2005, is pegged to three macroeconomic factors – the consumer price index (CPI), the average monthly earnings (WI) and the productivity extraction, which is a measure of productivity gains.
The original formula was 0.5 (change in CPI) + 0.5 (change in WI) – 0.3 per cent, where 0.3 per cent was the productivity extraction from 2005 to 2007.
For 2008-2012, PTC says the relative weights for changes in CPI and WI remain unchanged but the productivity extraction component is now 1.5 per cent. So the new formula is 0.5 (change in CPI) + 0.5 (change in WI) – 1.5 per cent.
PTC also announced that as part of the Land Transport Masterplan, distance-based through fares will be introduced to facilitate more seamless transfers on the public transport system.
Currently, a commuter who transfers between buses, or between bus and MRT, incurs a ‘transfer penalty’ when taking the subsequent vehicle because of the additional ‘boarding charge’.
But with the introduction of through fares, this penalty – about 35 cents now – will be reduced in two stages over 2008 and 2009, and commuters will only have to pay for the extra distance travelled.
The aim is to avoid penalising commuters who make transfer journeys, which can be faster than a single direct trip, and give them more route choices.
But depending on how PTC apportions the cost of reducing this ‘transfer penalty’ between operators and commuters, it may affect the bottom line of the two listed PTOs – SBS Transit and SMRT Corp. That will only be known in September because the PTOs have to first submit their applications for a fare hike in August. PTC will make known its decision in September, and the new fares will take effect in October.
Through fares could result in lower fare revenues for the PTOs and negate some of the benefits from a fare increase, says one industry analyst.
‘Even with a fare hike, the through fare adjustment may neutralise any potential revenue increase for the transport operators,’ he says.
He adds that it all depends on how many commuters start making transfers. Based on current travel patterns, four in 10 adult EZ-Link commuters make transfer journeys on a weekday. That number is expected to rise significantly with the introduction of through fares.
‘Under the new system, people who make transfers may pay lower fares, while those who don’t make transfers will pay more because of the 3 per cent fare increase,’ says the analyst.
‘Total fare revenues will depend on how many commuters make up each group.’
But there could be a silver lining in all this. He says: ‘While this may not seem like good news initially, lower fares could attract more people to use public transport, thus increasing the overall ridership and fare revenues.’
SMRT – Phillip
Strong set of results
FY08 Results. SMRT reported FY08 revenue of S$802.1m (+7.9% yoy) and net profit of S$149.9m (+10.4% yoy). The growth in revenue was due to higher ridership, and growth from rental and advertising. This mitigated the increase in GST, CPF contribution and energy costs.
Performances by various businesses. SMRT registered growth in revenues from all its operations. There was strong growth in MRT (+8.0% yoy), LRT (+6.6% yoy) and taxi (+10.8% yoy) operations while the buses operation posted minor growth in revenue (+2.9% yoy). The increase in average daily ridership resulted in the growth in revenues from the train and buses operations while the higher average hired-out fleet caused the growth in taxi operations.
Furthermore, SMRT also saw strong growth in revenues from rental (+21.8% yoy), advertising (+16.7% yoy) as well as engineering and other services (+13.2% yoy).
FY09 Outlook. Management expects revenues from all its operations to increase in FY09. However, operating expenses are also likely to rise. It also mentioned the increase of staff in preparation for the opening of Circle Line Stage 3.
Maintain HOLD recommendation, target price raised from S$1.70 to S$1.74. SMRT has posted good financial results. Moreover, it continues to register increases in revenues and profits. Therefore, the fair value is raised to S$1.74 based on our discounted cash flow model. This is a defensive stock for investors who would like to hold for payment of dividends.