UOBKayhian on 30 Jan 2015
FY15F PE (x): 27.1
FY16F PE (x): 20.9
Good progress made in 3QFY15. SMRT’s 9M15 net profit of S$70.2m (+56% yoy) was
in line with our estimates, representing 75% of full-year earnings forecast. The
improvement was on the back of an increase in operating margin to 10.1% (9MFY14:
7.1%). The fare segment (bus and rail) registered a 4% yoy rise in revenue, boosted by
higher ridership (2.5% yoy for trains and 4.4% yoy for bus) and higher fares. No interim
dividend was declared.
Maintain HOLD with a DCF-based target price of $1.73 (WACC: 7.9%, terminal growth:
3.0%). SMRT looks like it is fairly valued after rising 15% the past three months. A
possible entry level would be S$1.56. We note that SMRT’s FY15 dividend yield of
2.0% and PE of 27.0x is not far off ComfortDegro’s FY14 dividend yield of 2.4% and PE
of 22.0x. We expect SMRT to re-rate, should there be any further details offering clarity
on the railway restructuring. However, we continue to favour ComfortDelGro for its
overseas growth potential, diversification and cheaper valuations.
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