UBS research: SMRT
UBS Investment Research
SMRT Corporation Ltd

Cost pressures rise following breakdown
Govt-commissioned Committee of Inquiry to examine SMRT breakdowns
A high level Committee of Inquiry will scrutinise SMRT following serious
network disruptions on the 14th, 15th and 17th December, which affected a total of
222,400 commuters. The committee’s findings and proposals to improve service
reliability and safety (among others) will be made public and we assume SMRT
would need to implement changes to prevent a repeat of last week’s disruption.

Higher repair & maintenance expenditure hereafter
We assume SMRT would incur a S$2-3m fine due to the breakdowns. In addition,
we expect a permanent increase in repair and maintenance expenses, due to more
frequent and intensive checks on its 24 year old NSEW trunk line. Over FY02-11,
SMRT’s average maintenance expenses amounted to 9.2% of revenue from trains,
buses and taxis. If we assume this rises to ~10%, it implies an annual FY13-15E
EBIT impact of ~S$6.0-9.4m. Accordingly, we cut FY12/13/14/15E EPS by
2.7%/3.5%/4.3%/9.4% respectively.

Cutting estimates; Dividend should be safe, for now
We believe SMRT’s financial ability to maintain its absolute level of DPS is high,
despite rising cost [Operating profit ~$300m; capex S$180m, dividends ~S$130m,
net gearing only 30%]. However, we warn that if public frustration with SMRT
does not dissipate by Apr 2012 when FY results are announced, SMRT’s ability to
commit to its generous policy might be affected and we would revisit this view.

Valuation: DCF-based price target cut to S$1.70 from S$1.85
We believe DCF is valid given its 80% payout ratio. We use COE=7.8%, Rf 2.7%.

只要掉到价位， 还是要买的
负面归负面， 这种public service, 一些complain还不至于影响他们的盈利。只要分红在哪儿， 只要盈利在哪儿， 还是一样要买的。
资本只是逐利， 别的不作考虑