SMRT still burdened with bleak bus business

Operating profits were dragged down by 157%.

According to Maybank Kim Eng, 1HFY3/13 results, dividend cut in line with our forecasts. SMRT reported 1HFY3/13 NPAT of SGD69.8m, which came in at 50% of ours and consensus’ full-year estimates.

Here's more from Maybank Kim Eng:

In our July 2012 land transport sector note “No light at the end of SMRT’s tunnel yet”, we had cut our FY3/13 dividend forecast by 10% due to impinged cashflow.

This projection was seemingly validated as SMRT cut its interim dividend by 14% from SG1.75cts/sh to SG1.50cts/sh on the premise of prudence - management guided that FY3/13 will remain challenging on cost pressures and lack of fare adjustments until 2013.

We maintain our SELL call, and roll forward our valuations based on FY3/14 PER.

Buses still weighing down transport portfolio. SMRT’s bus business continued its poor results, as operating profits were down SGD4mil (-157% YoY) on increased staff costs from salary revisions and higher depreciation and R&M costs associated with a larger fleet.

This was mitigated by operating profit growth YoY in the rail (+6.5%), taxi (+SGD1.2m) and commercial space rental (+7.4%) segments. Government help still not guaranteed.

Management shared that the company had applied to, and was awaiting a response from the LTA for asset replacement grants for funding part of the SGD900m asset renewal plan announced earlier.

In addition, grant amounts / formulas have yet to be nailed down for the sharing of bus shelter advertising revenues as part of the Bus Services Enhancement Programme (BSEP).

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