SMRT – OCBC
Outlook remains largely positive
- Series of train disruptions
- Remains upbeat on same growth catalysts
- Lower FV; reiterate BUY
A series of unfortunate disruptions
SMRT’s trains experienced five disruptions over the past two weeks across the North-South Line (NSL), East West Line (EWL), Circle Line (CCL), and Bukit Panjang LRT Line. Last year, SMRT were fined S$1.6m for two safety breaches and two train disruptions. Of the S$1.6m, the heavier fines came from the two safety breaches amounting to a total of S$1.3m. On these recent incidents, the longest delay was more than four hours on NSL on 23-Feb due to damaged train components. With these disruptions deemed unacceptable by LTA, we updated in our forecasts to provide for fines in FY16 with an amount slightly more than twice of what was paid in FY15.
Higher expenses expected but growth catalysts still present
SMRT announced last Friday its plans to improve rail reliability. There were two key points that required us to update our forecasts from FY16 onwards: 1) SMRT is expected to expand its workforce of engineers and technicians by another 39% and 24% respectively, by 2018, and 2)SMRT to provide more training to ground staff, setting up maintenance operations centre to support and coordinate response by maintenance teams during rail incidents as well as investing to equip maintenance teams with computer tablets to support maintenance needs. However, we believe its growth catalysts are still valid: 1) energy expenses to see further savings as electricity costs is expected to continue to decrease while FY16 diesel needs are largely exposed, 2) full-year rental income contribution from Kallang Wave Mall in FY16, 3) taxi rental income growth through fleet renewal, 4) core bus operations to turn profitable with forecasted margins of ~9.0%, from 2QFY17 after transit to new bus model, 5) potential LTA’s purchase of SMRT bus assets with lump sum cash payment resulting to possible special dividend and/or acquisitions for growth, 6) longer-term catalyst of transit to new rail financing framework, leading to potential purchase of train assets by LTA, though no timeline is provided by LTA.
Lower FV; reiterate BUY
Consequently, we cut FY16 PATMI forecast by 10.5%, as we incorporate higher expenses and potential fines. We reiterate BUY on SMRT on positive growth outlook although our DDM-derived FV decreases from S$1.90 to S$1.85.
SMRT – OCBC
Outlook remains largely positive
- Series of train disruptions
- Remains upbeat on same growth catalysts
- Lower FV; reiterate BUY
A series of unfortunate disruptions
SMRT’s trains experienced five disruptions over the past two weeks across the North-South Line (NSL), East West Line (EWL), Circle Line (CCL), and Bukit Panjang LRT Line. Last year, SMRT were fined S$1.6m for two safety breaches and two train disruptions. Of the S$1.6m, the heavier fines came from the two safety breaches amounting to a total of S$1.3m. On these recent incidents, the longest delay was more than four hours on NSL on 23-Feb due to damaged train components. With these disruptions deemed unacceptable by LTA, we updated in our forecasts to provide for fines in FY16 with an amount slightly more than twice of what was paid in FY15.
Higher expenses expected but growth catalysts still present
SMRT announced last Friday its plans to improve rail reliability. There were two key points that required us to update our forecasts from FY16 onwards: 1) SMRT is expected to expand its workforce of engineers and technicians by another 39% and 24% respectively, by 2018, and 2)SMRT to provide more training to ground staff, setting up maintenance operations centre to support and coordinate response by maintenance teams during rail incidents as well as investing to equip maintenance teams with computer tablets to support maintenance needs. However, we believe its growth catalysts are still valid: 1) energy expenses to see further savings as electricity costs is expected to continue to decrease while FY16 diesel needs are largely exposed, 2) full-year rental income contribution from Kallang Wave Mall in FY16, 3) taxi rental income growth through fleet renewal, 4) core bus operations to turn profitable with forecasted margins of ~9.0%, from 2QFY17 after transit to new bus model, 5) potential LTA’s purchase of SMRT bus assets with lump sum cash payment resulting to possible special dividend and/or acquisitions for growth, 6) longer-term catalyst of transit to new rail financing framework, leading to potential purchase of train assets by LTA, though no timeline is provided by LTA.
Lower FV; reiterate BUY
Consequently, we cut FY16 PATMI forecast by 10.5%, as we incorporate higher expenses and potential fines. We reiterate BUY on SMRT on positive growth outlook although our DDM-derived FV decreases from S$1.90 to S$1.85.
February 2015
Results Announcement
- 3 Feb 15 : SIAEC (Q315) – EPS 4.13ct vs 5.43ct (Q314) / 12.67ct (9M15) vs 18.03ct (9M14)
- 4 Feb 15 : SATS (Q315) – EPS 4.3ct vs 3.8ct (Q314) / 12.9ct (9M15) vs 12.3ct (9M14)
- 4 Feb 15 : SingPost (Q315) – EPS 1.794ct vs 1.873ct (Q114) / 5.228ct (9M15) vs 5.327ct (9M14) ; Div 1.25ct (no change)
- 10 Feb 15 : SBSTransit (Q414) – EPS 0.08ct vs 0.53ct (Q413) / 4.62ct (FY14) vs 3.62ct (FY13) ; Div 1.05ct vs 0.9ct (2H13) / 2.3ct (FY14) vs 1.8ct (FY13)
- 11 Feb 15 : ComfortDelgro (Q414) – EPS 2.98ct vs 2.82ct (Q413) / 13.29ct (FY14) vs 12.43ct (FY13) ; Div 4.5ct vs 4ct (2H13) / 8.25ct (FY14) vs 7ct (FY13)
- 12 Feb 15 (AM) : Singtel (Q315) – EPS 6.09ct vs 5.47ct (Q314) / 17.84ct (9M15) vs 17.28ct (9M14)
- 25 Feb 15 : Starhub (Q414) – EPS 5.5ct vs 5ct (Q413 – restated) / 21.5ct (FY14) vs 22.1ct (FY13 – restated) ; Div 5ct (no change) ; 20ct (FY14 – No Change)
- 26 Feb 15 : HLFin (FY14) – EPS 14.17ct vs 15.85ct (FY13) ; Div 6ct (2H14) vs 8ct (2H13) / 10ct (FY14) vs 12ct (FY13)
- 27 Feb 15 (AM) : STEng (Q414) – EPS 4.48ct vs 5.37ct (Q413) / 17.06ct (FY14) vs 18.73ct (FY13) ; Div 4ct (Final) + 7ct (Special) vs 4ct+8ct (2H13) / 15ct (FY14) – No Change
STI = 3402.86 (-23.32)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
Hong Leong Fin |
FY14 (Dec) |
14.17 |
10.00 |
$2.620 |
3.817% |
18.49 |
Interim 4ct ; Final 6ct |
|
SGX |
FY14 (Jun) |
30 |
28 |
$8.180 |
3.423% |
27.27 |
Q1, Q2, Q3 4ct ; Q4 4ct +12ct |
|
SingPost |
FY14 (Mar) |
6.746 |
6.25 |
$2.000 |
3.125% |
29.65 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY14 (Aug) |
25 |
21 |
$4.090 |
5.134% |
16.36 |
Interim 7ct ; Final 8ct + Special 6ct |
Note : SGX Added from May-14 ; Q4 Variable Div Depends on FY EPS
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY14 (Mar) |
16.10 |
13.0 |
$3.160 |
4.114% |
19.63 |
Interim 5ct ; Final 8ct |
|
SIA Engineering |
FY14 (Mar) |
23.88 |
25.0 |
$4.250 |
5.882% |
17.80 |
Interim 7ct ; Final 13ct + Special 5ct |
|
ST Engineering |
FY13 (Dec) |
18.73 |
15.0 |
$3.510 |
4.274% |
20.57 |
Interim 3ct ; Final 4ct + Special 8ct |
Note : SIAEC Special Div is Observed to be Non-Recurring (Depends on Excess Cash)
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY14 (Dec) |
4.62 |
2.30 |
$1.830 |
1.257% |
39.61 |
Interim 1.25ctct ; Final 1.05ct |
|
ComfortDelGro |
FY14 (Dec) |
13.29 |
8.25 |
$2.940 |
2.806% |
22.12 |
Interim 3.75ct ; Final 4.5ct |
|
SMRT |
FY14 (Mar) |
4.10 |
2.20 |
$1.740 |
1.264% |
42.44 |
Interim 1.0ct ; Final 1.2ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY14 (Mar) |
22.92 |
16.8 |
$4.220 |
3.981% |
18.41 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY14 (Dec) |
18.9 |
18.9 |
$3.960 |
4.773% |
20.95 |
Interim 7ct ; Final 11.9ct |
|
StarHub |
FY14 (Dec) |
21.50 |
20 |
$4.290 |
4.662% |
19.95 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
AusNet Services |
1H – Sep14 |
A4.18 (Gross) |
$1.530 |
5.802% |
A$0.86 |
1H15 A4.18ct ; 2H14 A4.18ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.0619) fm Yahoo
NOTES :
- Mkt Price is as on 27-Feb-15
- ST Engg : 2H14 (Dec) – 4ct (Final) + 7ct (Special) ; 1H14 (Jun) – 4ct / Payout = 88% (Not Reduced to 75% altho’ guided in Annc During FY13 Results)
- HLFin : 2H14 (Dec) – 6ct ; 1H14 (Jun) – 4ct
- StarHub : Q414 (Dec) – 5ct ; Q314 (Sep) – 5ct ; Q214 (Jun) – 5ct ; Q114 (Mar) – 5ct
- StarHub : FY15 Div Guidance – 5ct/Q
- M1 : 2H14 (Dec) – Final 11.9ct ; 1H14 (Jun) – Interim 7ct
- SATSvcs : 1H15 (Sep14) – Interim 5ct
- SingTel : 1H15 (Sep14) – Interim 6.8ct
- AusNet : 1H15 (Sep14) – A4.18ct = A2.2ct (Franked) + A1.98ct (Interest – Subject to 10% Tax) ; 2H14 (Mar14) – A4.18ct = A1.393ct (Franked) + A2.379ct (Interest – Subject to 10% Tax) + A0.408ct (Capital Returns)
- SingPost : Q215 (Sep14) – 1.25ct ; Q115 (Jun14) – 1.25ct
- SIAEC : 1H15 (Sep14) – Interim 6ct
- SMRT : 1H15 (Sep14) – Interim 1.5ct
- SGX : Q115 (Sep14) – 4ct
- SPH : 2H14 (Aug) – Final 8ct + Special 6ct ; 1H14 (Feb) – Interim 7ct
- ComfortDelgro : 1H14 (Jun) –3.5ct
- SBSTransit : 1H14 (Jun) – 1.25ct
- SPAus : FY15 Guidance = A8.36ct Gross
- ST Engg : Dividend Payout Reduced from 90% to 80% for FY13 & Will Be Further Reduced to 75% from FY14
- SingTel : Div Policy – 60% to 75% of Underlying Net Profit
February 2015
Results Announcement
- 3 Feb 15 : SIAEC (Q315) – EPS 4.13ct vs 5.43ct (Q314) / 12.67ct (9M15) vs 18.03ct (9M14)
- 4 Feb 15 : SATS (Q315) – EPS 4.3ct vs 3.8ct (Q314) / 12.9ct (9M15) vs 12.3ct (9M14)
- 4 Feb 15 : SingPost (Q315) – EPS 1.794ct vs 1.873ct (Q114) / 5.228ct (9M15) vs 5.327ct (9M14) ; Div 1.25ct (no change)
- 10 Feb 15 : SBSTransit (Q414) – EPS 0.08ct vs 0.53ct (Q413) / 4.62ct (FY14) vs 3.62ct (FY13) ; Div 1.05ct vs 0.9ct (2H13) / 2.3ct (FY14) vs 1.8ct (FY13)
- 11 Feb 15 : ComfortDelgro (Q414) – EPS 2.98ct vs 2.82ct (Q413) / 13.29ct (FY14) vs 12.43ct (FY13) ; Div 4.5ct vs 4ct (2H13) / 8.25ct (FY14) vs 7ct (FY13)
- 12 Feb 15 (AM) : Singtel (Q315) – EPS 6.09ct vs 5.47ct (Q314) / 17.84ct (9M15) vs 17.28ct (9M14)
- 25 Feb 15 : Starhub (Q414) – EPS 5.5ct vs 5ct (Q413 – restated) / 21.5ct (FY14) vs 22.1ct (FY13 – restated) ; Div 5ct (no change) ; 20ct (FY14 – No Change)
- 26 Feb 15 : HLFin (FY14) – EPS 14.17ct vs 15.85ct (FY13) ; Div 6ct (2H14) vs 8ct (2H13) / 10ct (FY14) vs 12ct (FY13)
- 27 Feb 15 (AM) : STEng (Q414) – EPS 4.48ct vs 5.37ct (Q413) / 17.06ct (FY14) vs 18.73ct (FY13) ; Div 4ct (Final) + 7ct (Special) vs 4ct+8ct (2H13) / 15ct (FY14) – No Change
STI = 3402.86 (-23.32)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
Hong Leong Fin |
FY14 (Dec) |
14.17 |
10.00 |
$2.620 |
3.817% |
18.49 |
Interim 4ct ; Final 6ct |
|
SGX |
FY14 (Jun) |
30 |
28 |
$8.180 |
3.423% |
27.27 |
Q1, Q2, Q3 4ct ; Q4 4ct +12ct |
|
SingPost |
FY14 (Mar) |
6.746 |
6.25 |
$2.000 |
3.125% |
29.65 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY14 (Aug) |
25 |
21 |
$4.090 |
5.134% |
16.36 |
Interim 7ct ; Final 8ct + Special 6ct |
Note : SGX Added from May-14 ; Q4 Variable Div Depends on FY EPS
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY14 (Mar) |
16.10 |
13.0 |
$3.160 |
4.114% |
19.63 |
Interim 5ct ; Final 8ct |
|
SIA Engineering |
FY14 (Mar) |
23.88 |
25.0 |
$4.250 |
5.882% |
17.80 |
Interim 7ct ; Final 13ct + Special 5ct |
|
ST Engineering |
FY13 (Dec) |
18.73 |
15.0 |
$3.510 |
4.274% |
20.57 |
Interim 3ct ; Final 4ct + Special 8ct |
Note : SIAEC Special Div is Observed to be Non-Recurring (Depends on Excess Cash)
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY14 (Dec) |
4.62 |
2.30 |
$1.830 |
1.257% |
39.61 |
Interim 1.25ctct ; Final 1.05ct |
|
ComfortDelGro |
FY14 (Dec) |
13.29 |
8.25 |
$2.940 |
2.806% |
22.12 |
Interim 3.75ct ; Final 4.5ct |
|
SMRT |
FY14 (Mar) |
4.10 |
2.20 |
$1.740 |
1.264% |
42.44 |
Interim 1.0ct ; Final 1.2ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY14 (Mar) |
22.92 |
16.8 |
$4.220 |
3.981% |
18.41 |
Interim 6.8ct ; Final 10ct |
|
M1 |
FY14 (Dec) |
18.9 |
18.9 |
$3.960 |
4.773% |
20.95 |
Interim 7ct ; Final 11.9ct |
|
StarHub |
FY14 (Dec) |
21.50 |
20 |
$4.290 |
4.662% |
19.95 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
AusNet Services |
1H – Sep14 |
A4.18 (Gross) |
$1.530 |
5.802% |
A$0.86 |
1H15 A4.18ct ; 2H14 A4.18ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.0619) fm Yahoo
NOTES :
- Mkt Price is as on 27-Feb-15
- ST Engg : 2H14 (Dec) – 4ct (Final) + 7ct (Special) ; 1H14 (Jun) – 4ct / Payout = 88% (Not Reduced to 75% altho’ guided in Annc During FY13 Results)
- HLFin : 2H14 (Dec) – 6ct ; 1H14 (Jun) – 4ct
- StarHub : Q414 (Dec) – 5ct ; Q314 (Sep) – 5ct ; Q214 (Jun) – 5ct ; Q114 (Mar) – 5ct
- StarHub : FY15 Div Guidance – 5ct/Q
- M1 : 2H14 (Dec) – Final 11.9ct ; 1H14 (Jun) – Interim 7ct
- SATSvcs : 1H15 (Sep14) – Interim 5ct
- SingTel : 1H15 (Sep14) – Interim 6.8ct
- AusNet : 1H15 (Sep14) – A4.18ct = A2.2ct (Franked) + A1.98ct (Interest – Subject to 10% Tax) ; 2H14 (Mar14) – A4.18ct = A1.393ct (Franked) + A2.379ct (Interest – Subject to 10% Tax) + A0.408ct (Capital Returns)
- SingPost : Q215 (Sep14) – 1.25ct ; Q115 (Jun14) – 1.25ct
- SIAEC : 1H15 (Sep14) – Interim 6ct
- SMRT : 1H15 (Sep14) – Interim 1.5ct
- SGX : Q115 (Sep14) – 4ct
- SPH : 2H14 (Aug) – Final 8ct + Special 6ct ; 1H14 (Feb) – Interim 7ct
- ComfortDelgro : 1H14 (Jun) –3.5ct
- SBSTransit : 1H14 (Jun) – 1.25ct
- SPAus : FY15 Guidance = A8.36ct Gross
- ST Engg : Dividend Payout Reduced from 90% to 80% for FY13 & Will Be Further Reduced to 75% from FY14
- SingTel : Div Policy – 60% to 75% of Underlying Net Profit
SATS – OCBC
Cost management start to yield results
- Results above expectations
- Cost management still a key focus\
- Increase FV; maintain HOLD
3QFY15 PATMI jumped 25.2% YoY to S$53.7m
SATS reported a good set of 3QFY15 results on the back of disciplined cost management and favourable business mix which pushed up overall operating margins. While revenue declined 3.2% YoY to S$450.7m, PATMI saw a 25.2% jump to S$53.7m. The lower revenue is largely attributable to the weaker result from its Japan subsidiary, TFK, resulting in a 7.2% YoY drop in its 3QFY15 Food Solutions (FS) segment revenue. Gateway Services (GS) 3QFY15 revenue, however, saw a 3.5% increase as SATS continue to gain market share in cargo handling business in Singapore. The shift in business mix away from FS segment resulted in a 13.1% drop in 3QFY15 raw materials expenses. Lower staff costs also helped improve profitability. SATS 9MFY15 PATMI came in above expectations with a 4.6% YoY increase, as it formed 79.6% and 78.4% of the street and our FY15 forecasts.
Cost management a key focus amid challenging outlook
Management reiterated strategy is still to focus on managing costs and improving productivity, which include a dynamic roster system, and investing in technology to increase operating leverage through automation, which requires fewer employees and hence lower staff expenses. Also, with the FS segment revenue declining on higher LCCs’ flight cancellations, the expected shift in business mix towards more cargo handling of higher margins (which makes up ~33% of GS segment revenue) is likely to continue, especially for pharmaceutical cargos. In addition, while share of profits from overseas GS associated/JV companies is likely to continue to face volume and price pressures, we expect lower energy costs and FS segment account rationalisation to improve profitability. We also expect TFK’s revenue to still be muted due to overcapacity of caterers in Narita Airport.
Decent dividend expected; maintain HOLD
We continue to think SATS will maintain a decent level of dividend pay-out (~90%). Incorporating 3QFY15 results and the above factors, our FY15/16F forecasts increase by 5.1% and 5.7%, respectively. Based on 16.5x FY16F PER (5-year mean), our FV increases to S$2.98 (previous: S$2.92). Maintain HOLD.