As expected, SMRT reported another set of lacklustre results for 3QFY14. Although revenue climbed 4.1% YoY to S$293.3m, PATMI dipped 44.1% to S$14.2m. This was largely due to operating losses (S$9.0m) recorded for its Fare business, which includes a first ever quarterly loss of S$0.2m for its Rail operations. However, its Non-fare business managed to deliver a 6.1% YoY growth in operating profit to S$27.3m. We fine-tune our forecasts following a change in analyst coverage. In light of the uncertainty surrounding SMRT’s opex and capex outlook, we also deem it prudent to reduce our terminal growth rate assumption in our DDM valuation from 2% to 1.5%. Correspondingly, our fair value is lowered from S$1.30 to S$1.06. We downgrade SMRT from Hold to SELL, given its lofty valuations (26.9x FY15F PER, versus its historical 5-year average forward PER of ~18x).
3QFY14 earnings weak as expected
As expected, SMRT reported another set of lacklustre results for 3QFY14. Although revenue climbed 4.1% YoY to S$293.3m due to positive contribution from all segments except its Taxi and LRT operations, PATMI dipped 44.1% to S$14.2m as operating expenses increased at a faster pace of 10.6%. The main culprit was a 21.4% hike in SMRT’s staff costs to S$119.6m, which formed 40.8% of its topline, versus 35.0% in 3QFY13. For 9MFY14, revenue rose 4.3% to S$874.4m but PATMI slumped 52.8% to S$45.0m.
Operating losses widened for Fare business
SMRT’s Rail operations (Train and LRT combined) recorded its first ever quarterly loss of S$0.2m in 3QFY14, while its Bus operations slipped deeper into the red (3QFY14 operating loss of S$8.9m versus S$7.0m loss in 3QFY13). Collectively, SMRT’s Fare business (Train, Bus and LRT) suffered a S$9.0m operating loss, in contrast to 3QFY13’s S$7.4m operating profit. This was, however, offset by positive growth in operating profit for its Non-fare business (+6.1% YoY to S$27.3m). In terms of balance sheet strength, SMRT’s net gearing increased from 8.3% as at 31 Dec 2012 to 63.7% as at 31 Dec 2013, largely due to the payment of S$392.7m for 17 trains and operating assets taken over from the LTA.
Downgrade to SELL
We fine-tune our forecasts following a change in analyst coverage. In light of the uncertainty surrounding SMRT’s opex and capex outlook, we also deem it prudent to reduce our terminal growth rate assumption in our DDM valuation from 2% to 1.5%. Correspondingly, our fair value is lowered from S$1.30 to S$1.06. While we expect SMRT to benefit positively from the 3.2% fare revision introduced by the Public Transport Council (effective 6 Apr 2014), its cost pressures are likely to remain elevated, in our view. Moreover, the stock is trading at lofty valuations of 26.9x FY15F PER, versus its historical 5-year average forward PER of ~18x. Hence we downgrade SMRT from Hold to SELL.
As expected, SMRT reported another set of lacklustre results for 3QFY14. Although revenue climbed 4.1% YoY to S$293.3m due to positive contribution from all segments except its Taxi and LRT operations, PATMI dipped 44.1% to S$14.2m as operating expenses increased at a faster pace of 10.6%. The main culprit was a 21.4% hike in SMRT’s staff costs to S$119.6m, which formed 40.8% of its topline, versus 35.0% in 3QFY13. For 9MFY14, revenue rose 4.3% to S$874.4m but PATMI slumped 52.8% to S$45.0m.
Operating losses widened for Fare business
SMRT’s Rail operations (Train and LRT combined) recorded its first ever quarterly loss of S$0.2m in 3QFY14, while its Bus operations slipped deeper into the red (3QFY14 operating loss of S$8.9m versus S$7.0m loss in 3QFY13). Collectively, SMRT’s Fare business (Train, Bus and LRT) suffered a S$9.0m operating loss, in contrast to 3QFY13’s S$7.4m operating profit. This was, however, offset by positive growth in operating profit for its Non-fare business (+6.1% YoY to S$27.3m). In terms of balance sheet strength, SMRT’s net gearing increased from 8.3% as at 31 Dec 2012 to 63.7% as at 31 Dec 2013, largely due to the payment of S$392.7m for 17 trains and operating assets taken over from the LTA.
Downgrade to SELL
We fine-tune our forecasts following a change in analyst coverage. In light of the uncertainty surrounding SMRT’s opex and capex outlook, we also deem it prudent to reduce our terminal growth rate assumption in our DDM valuation from 2% to 1.5%. Correspondingly, our fair value is lowered from S$1.30 to S$1.06. While we expect SMRT to benefit positively from the 3.2% fare revision introduced by the Public Transport Council (effective 6 Apr 2014), its cost pressures are likely to remain elevated, in our view. Moreover, the stock is trading at lofty valuations of 26.9x FY15F PER, versus its historical 5-year average forward PER of ~18x. Hence we downgrade SMRT from Hold to SELL.
No comments:
Post a Comment