SMRT reported 4QFY14 revenue of S$289.5m (+2.9% YoY) and PATMI of S$16.9m, with the latter a reversal from a net loss of S$11.9m suffered in 4QFY13. For FY14, revenue climbed 4.0% to S$1,163.9m. PATMI dipped 25.7% to S$61.9m but still exceeded our expectations by 11.9%. Looking ahead, we expect improvement from its loss-making Fare business, given the recently implemented fare adjustment exercise and efforts to manage its costs and bolster productivity gains. Although there is still a lack of details on the rail financing framework which has generated much hype, we believe there will eventually be an overall net benefit to SMRT. We increase our FY15 PATMI forecast by 6.7% and introduce our FY16 projections. Rolling forward our DDM valuation, we bump up our fair value estimate from S$1.06 to S$1.25. Given our belief that the worst may be over for SMRT, we upgrade the stock to HOLD.
4QFY14 earnings exceeded our expectations
SMRT reported a 2.9% YoY growth in its 4QFY14 revenue to S$289.5m. PATMI of S$16.9m was a reversal from a net loss of S$11.9m in 4QFY13. Excluding a one-off S$17.3m impairment of interest in an associate in 4QFY13, SMRT’s 4QFY14 PATMI still grew by 215.2%. For FY14, revenue climbed 4.0% to S$1,163.9m, in line with our forecast of S$1,166.7m. PATMI dipped 25.7% to S$61.9m but still exceeded our expectations by 11.9% due largely to higher-than-expected ‘other operating income’. A final DPS of 1.2 S cents was declared, bringing FY14 dividends to 2.2 S cents/share (yield of 1.8%). This was lower than the 2.5 S cents DPS paid out in FY13 but ahead of our 1.8 S cents/share forecast.
Fare business a drag, but mitigated by Non-Fare business
SMRT raked in an operating loss of S$25.0m in FY14 from its Fare business (FY13: operating profit of S$32.3m) but this was mitigated by a 12.4% growth in operating profit from its Non-Fare business to S$106.4m. We expect improvement from its Fare business ahead, given the recently implemented fare adjustment exercise and efforts to manage its costs and bolster productivity gains.
Rail financing framework a likely positive, but details unclear
Most of the questions raised during the analyst briefing were directed to updates on the rail financing framework. Management said that it has already submitted a detailed proposal to LTA in early Apr, but stopped short of giving a timeframe on when it would materialise as there are many issues to be discussed. Although there is still a lack of details, we believe there will eventually be an overall net benefit to SMRT as the very purpose of the rail financing framework is to enhance the sustainability of the sector. Taking into account this latest set of results, we increase our FY15 PATMI forecast by 6.7% and introduce our FY16 projections. Rolling forward our DDM valuation, we bump up our fair value estimate from S$1.06 to S$1.25. Given our belief that the worst may be over for SMRT, we upgrade the stock toHOLD.
SMRT reported a 2.9% YoY growth in its 4QFY14 revenue to S$289.5m. PATMI of S$16.9m was a reversal from a net loss of S$11.9m in 4QFY13. Excluding a one-off S$17.3m impairment of interest in an associate in 4QFY13, SMRT’s 4QFY14 PATMI still grew by 215.2%. For FY14, revenue climbed 4.0% to S$1,163.9m, in line with our forecast of S$1,166.7m. PATMI dipped 25.7% to S$61.9m but still exceeded our expectations by 11.9% due largely to higher-than-expected ‘other operating income’. A final DPS of 1.2 S cents was declared, bringing FY14 dividends to 2.2 S cents/share (yield of 1.8%). This was lower than the 2.5 S cents DPS paid out in FY13 but ahead of our 1.8 S cents/share forecast.
Fare business a drag, but mitigated by Non-Fare business
SMRT raked in an operating loss of S$25.0m in FY14 from its Fare business (FY13: operating profit of S$32.3m) but this was mitigated by a 12.4% growth in operating profit from its Non-Fare business to S$106.4m. We expect improvement from its Fare business ahead, given the recently implemented fare adjustment exercise and efforts to manage its costs and bolster productivity gains.
Rail financing framework a likely positive, but details unclear
Most of the questions raised during the analyst briefing were directed to updates on the rail financing framework. Management said that it has already submitted a detailed proposal to LTA in early Apr, but stopped short of giving a timeframe on when it would materialise as there are many issues to be discussed. Although there is still a lack of details, we believe there will eventually be an overall net benefit to SMRT as the very purpose of the rail financing framework is to enhance the sustainability of the sector. Taking into account this latest set of results, we increase our FY15 PATMI forecast by 6.7% and introduce our FY16 projections. Rolling forward our DDM valuation, we bump up our fair value estimate from S$1.06 to S$1.25. Given our belief that the worst may be over for SMRT, we upgrade the stock toHOLD.
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