- 4QFY3/15 net income marginally below. Trains reported first quarterly loss. Cut FY3/16 EPS by 3% for higher operating & financing costs.
- Details on rail transition still lacking.
- Maintain HOLD. Lower TP to SGD1.57 from SGD1.60, still at 20x FY3/16 EPS.
4QFY3/15 net income of SGD20.8m was below expectations, with FY3/15 EPS at 92% of our projection. This was because its train division reported its first ever quarterly loss of SGD2.4m. It is expected to remain under pressure. Net fare hikes of 1.9% or gross increases of 2.8% should be offset by higher costs from a larger fleet, the opening of the Tuas West extension and higher maintenance costs. Management said it has made progress in its transition to a new rail-financing framework but declined to elaborate. It attributed its lower bid for the Bulim bus package to cost advantages as the incumbent. A final DPS of 1.75 SGD cts was proposed, bringing FY3/15 DPS to 3.25 SGD cts for a 1.9% yield.
New venture positive; not material near term
On its latest partnership with Consistel (note), management says it has no intention to be the fourth telco and remains committed to the transport business. Rather, it is taking advantage of its extensive commuter reach with this venture.
Awaiting elaboration on rail transition
We lower FY3/16 EPS by 3% for higher operating and financing costs to fund elevated capex. No change to our FY3/17 forecasts. Consequently, our TP drops to SGD1.57, still at 20x FY3/16 EPS, 1 SD above its 10-year average. While its transition to a sustainable rail model is positive, details remain lacking. Maintain HOLD.
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