SMRT’s 2Q13 results came in within our expectations although operating expenses outpaced revenue growth. Revenue grew 7.7% YoY to S$281.2m on the back of higher ridership and full contribution from the Circle Line (CCL) while operating profit fell 3.5% YoY to S$40.6m following increases in operating expenses. SMRT also declared an interim dividend of 1.5 S cents (as compared to 1.75 S cents last year). While SMRT’s electricity hedges had yielded encouraging cost savings and will continue to do so in 2H13, we lowered our estimates on the likelihood of higher operating expenses i.e. greater staff, repairs and maintenance costs. Nonetheless, our DDM-derived valuation of S$1.71 (assuming a 60% full-year PATMI payout) remains unchanged. Maintain HOLD.
2Q13 results within expectations
SMRT’s 2Q13 results came in within our expectations (+/-2% of our estimates): revenue grew 7.7% YoY to S$281.2m on the back of higher ridership and full contribution from the Circle Line (CCL) while operating profit fell 3.5% YoY to S$40.6m following a faster pace in operating expenses increases (+10.3% YoY). Net profit fell correspondingly by 2.2% YoY to S$33.3m. Excluding one-off items, 2Q13 EBITDA was higher by 7.6% YoY to S$78.7m although EBITDA margin remained flat at 28%. SMRT also declared an interim dividend of 1.5 S cents (as compared to 1.75 S cents last year).
Higher operating expenses likely in 2H13
We are likely to see further increases in operating expenses across the board as SMRT continues its emphasis on improving service quality and standards. Up to 500 more staff could potentially be added in 2H13 while a greater frequency of repairs and maintenance work will drive up costs. In addition, other operating expenses have also gone up with the increase in SMRT’s taxi fleet.
2H13 estimates lowered
Although SMRT’s 2Q13 results were within our expectations, a potential pickup in pace of operating expense increases led us to incorporate more conservative assumptions for 2H13 and lower our estimates accordingly. Leaving our top-line figures unchanged, we reduced our FY13 operating profit by 5% to incorporate the increases in operating expenses. This brought our PATMI down by 6.3% to S$123m, which is still a 3.2% increase over FY12.
Valuation of S$1.71 unchanged; maintain HOLD
Despite lowering our estimates, our DDM (dividend discount model) derived valuation of S$1.71 remains unchanged. As the proposed interim dividend declared still accounts for 34.9% of 1H13 PATMI, which is not far off from the 38.6% payout over the same period last year, we deem that our previously assumed payout ratio of 60% of FY PATMI is still an achievable target. Maintain HOLD.
SMRT’s 2Q13 results came in within our expectations (+/-2% of our estimates): revenue grew 7.7% YoY to S$281.2m on the back of higher ridership and full contribution from the Circle Line (CCL) while operating profit fell 3.5% YoY to S$40.6m following a faster pace in operating expenses increases (+10.3% YoY). Net profit fell correspondingly by 2.2% YoY to S$33.3m. Excluding one-off items, 2Q13 EBITDA was higher by 7.6% YoY to S$78.7m although EBITDA margin remained flat at 28%. SMRT also declared an interim dividend of 1.5 S cents (as compared to 1.75 S cents last year).
Higher operating expenses likely in 2H13
We are likely to see further increases in operating expenses across the board as SMRT continues its emphasis on improving service quality and standards. Up to 500 more staff could potentially be added in 2H13 while a greater frequency of repairs and maintenance work will drive up costs. In addition, other operating expenses have also gone up with the increase in SMRT’s taxi fleet.
2H13 estimates lowered
Although SMRT’s 2Q13 results were within our expectations, a potential pickup in pace of operating expense increases led us to incorporate more conservative assumptions for 2H13 and lower our estimates accordingly. Leaving our top-line figures unchanged, we reduced our FY13 operating profit by 5% to incorporate the increases in operating expenses. This brought our PATMI down by 6.3% to S$123m, which is still a 3.2% increase over FY12.
Valuation of S$1.71 unchanged; maintain HOLD
Despite lowering our estimates, our DDM (dividend discount model) derived valuation of S$1.71 remains unchanged. As the proposed interim dividend declared still accounts for 34.9% of 1H13 PATMI, which is not far off from the 38.6% payout over the same period last year, we deem that our previously assumed payout ratio of 60% of FY PATMI is still an achievable target. Maintain HOLD.
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