SMRT.SI - S$1.80 / CD.SI - S$1.36
• The Public Transport Council (PTC) has approved only an overall net fare adjustment of 1%, which translates to a combined annual revenue increase of $15 mln for SMRT and SBS, 75% owned subsidiary of CD.
• The 2 operators had, after a deferral earlier this year (before the General Elections), applied for a 2.8% increase, justifiably citing cost increases.
• PTC’s decision is disappointing given the formula that has been in place for years, and which could easily justify a long-overdue increase.
• The decision is therefore “negative” news for both SMRT and CD / SBS, whether the former is more Singapore-centric than the latter, often used to justify an Underweight for the former and Overweight for the latter.
• Latest Bloomberg data shows either SELLs or HOLDs for SMRT, but either BUYs or HOLDs for CD.
• Yet, the relative performance of SMRT and CD over the years does not seem to support this argument.
• We would maintain our preference for SMRT over CD (a higher 4.7% yield to start with vs 4% respectively), until at least the award of the DownTown Line in the not-too-distant future, when the terms of the award would have to be closely scrutinized.
• We would argue that PTC’s latest decision has put paid to speculation of new players in the public transport space in Singapore.
• The new Transport Minister’s recent outright dismissal of Workers Party’s nationalization call is another consideration we have taken into account in forming our view.
• In view of the current state of global equities however, we would recommend HOLD for now.
No comments:
Post a Comment