SMRT

CIMB Research, April 30

SMRT's FY2013 profit missed expectations as cost inflation outpaced revenue growth. Margin pain will persist until SMRT moves to a more sustainable business model. Until then, not only are profits at risk, so are dividends.

Dividend payout was cut to 45 per cent versus its previous 60 per cent policy. FY2013 core net profit met only 92 per cent of our and consensus estimates. We cut our FY2014-15 EPS estimates by 21 to 27 per cent and introduce FY2016. Our target price (discounted cash flow, weighted average cost of capital 6.5 per cent) falls to $1.26.

Maintain "underperform"; de-rating catalysts are earnings and dividend disappointments.

UNDERPERFORM