SMRT is down 1.4% at $1.71, underperforming the STI’s 0.3% decline, but remaining within recent trading ranges after reporting fiscal-2Q13 net profit fell 2.2% on-year to $33.3 million as higher train and bus operation costs outweighed taxi-business improvements.
The results and SMRT’s dividend cut were in line with expectations, says Maybank-Kim Eng. The bus business is still weighing on increased staff and maintenance costs associated with a larger fleet, mitigated by on-year operating-profit growth in the rail, taxi and commercial-space-rental segments, it notes. Government help via asset-replacement grants for funding part of the $900 million asset-renewal plan still isn’t guaranteed, the house notes.
“The future for SMRT looks daunting as operating costs escalate, the group takes on debt (now net debt vs net cash in FY3/12), and fare revisions likely only kick in from mid-2013.” It nudges its target down to $1.37 from $1.38 after rolling valuations forward, keeping a Sell call. “SMRT’s stable-to-increasing dividends are a thing of the past;”
Maybank-KE forecasts a FY13 dividend cut to 6.8 cents/share. Orderbook quotes suggest the stock won’t retest its $1.70 intraday low.
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