Yahoo Finance 
Investor CentralSMRT Corporation Ltd - New rail financing framework or fare hike – which will come to its rescue?
3/9/2013 – SMRT Corporation has disappointed already weary analysts with its Q1 performance, prompting them to maintain their SELL calls.
Not surprising, given that management says the next twelve months will remain challenging in the absence of fare adjustments and continuing absorption of fare concessions.
Operating costs will also increase with wage increments, more hires, repairs and maintenance for trains, and depreciation arising from adding more train operating assets and increasing the bus and taxi fleets.
But there are also some positives: the Group seeks a smooth transition once the rail financing framework discussions with the Government conclude.
It also reveals that it is working to improve sustainability in its bus business.
The completion of the Woodlands Xchange will add more retail space and this should increase commercial contribution.
Despite these positives, there are few bulls among the analysts.
Price targets do not vary too widely: the highest we've read are S$1.30 and the lowest S$1.00.
Q1 financials reported July 30 were dogged by escalating costs across the Group's various business segments:
Revenue: +3.5% to S$284.8 mln
Net Profit: -55.2% to S$16.3 mln
Cash flow from operations: S$13.6 mln vs S$69.6 mln
Cash Reserves: S$114.6 mln vs S$185.0 mln
Final Dividend: None
If you just look at the revenue numbers, there was much to be happy about, with higher train, rental and taxi revenues.
Train revenue climbed 2.2% and bus revenue went up 1.7% because of higher ridership, and despite lower average fares.
For buses, there were higher staff costs, security, and higher depreciation of its larger fleet, offset by lower diesel costs.
Taxi revenue climbed 5.9%, as a result of a newer and larger hired-out fleet.
Rental of commercial space was also up, rising 9.3%, thanks to more lettable space following completion and redevelopment at various stations in the network.
Advertising revenue also rose, with a 3.1% increase, because there were more ads taken out on buses.
Engineering and Other Services revenue also climbed because there were more consultancy projects, registering a 21.5% increase.
But despite all these revenue increases, net profit dropped 55.2% as operating expenses climbed.
Cash and equivalent reserves shrank as a result of less cash from operations coming in and more cash going out for investments.
Cash from operating activities came in at S$13.6 mln compared to S$69.6 mln a year ago.
It invested more cash in the business to the tune of S$461.1 mln, compared to S$80.6 mln the previous year.
Loan and grants received came in at S$15.6 mln.
Analysts surveyed by Reuters have an average SELL call with a price target of S$1.15.
They are waiting for a catalyst: will it be a fare hike?
Or will it be a new financing framework for rail infrastructure?
Bullish analyst report
We did not find any bullish reports – sorry!
Bearish analyst report
OCBC Investment Research expects "more of the same for coming quarters", referring to operating expenses.
Costs for repairs and maintenance are only likely to go up.
It downgraded its call to SELL with fair value of S$1.30.
(3 more analyst reports)
While our purpose is to ask the questions which the man on the street would ask, and to help the everyday investor make informed investments, please note that:
Our articles and presentations ('our contents') are not investment advice nor should they be construed as investment advice or any recommendation of any kind; nor meant to cast allegations or insinuations of any kind against any individuals or entities. Before acting on the material in our contents, you should either seek independent advice tailored to your particular circumstances and intentions or rely on your own judgement.
Our articles and presentations express our observations, opinions and theoretical analysis based on the facts that we have gathered or have been provided to us. While we endeavour to ensure that our contents are accurate and are presented in good faith, we cannot and do not warrant the accuracy, adequacy or completeness of the material or that the material is suitable for its intended use; and we disclaim any such warranties express or implied that may be presumed by any party; neither do we take responsibility for the views of companies or other stakeholders or observers or sources quoted or hyperlinked in our contents. While every precaution has been taken in the preparation of our contents, we (and our principals) shall not be liable for any losses or damage or inconveniences due allegedly to errors or omissions in any facts or due allegedly to reliance on our contents in any way whatsoever; nor for any damage to any computer hardware, date information or materials allegedly caused by our contents.
All expressions of opinion and observations in our contents are subject to change without notice and we do not undertake a duty to update and supplement our contents or the information contained herein in the event we obtain any further or more complete information.
©2013 Investor Central® - a service of Hong Bao Media
