Hold rating on SMRT,prefer Comfort

UBS has a good report this morning.

1. It assumes SMRT would incur a S$2-3m fine due to the breakdowns.

2. Repair and maintenance expenses are going to go up for keeps.

3. It cut FY12/13/14/15E EPS by 2.7%/3.5%/4.3%/9.4% respectively.

4. But dividend should be safe, for now unless public frustration does not simmer down. Then its generous dividend policy might be affected.

5. UBS Valuation: DCF-based price target cut to S$1.70 from S$1.85

Lots of laughter (@ expense of SMRT's CEO) at: blog.omy.sg/alvinology/2011/12/22/intern...en-ms-saw-phaik-hwa/

I doubt the dividend will be cut as a result of public frustration over service issues. The right way to look at the issue is for SMRT to get to the root causes of the service issues -- and implement whatever it takes to resolve them. That is how the Committee of Inquiry will also approach its job. The dividend payout is a matter for the Board to decide based on capex and future funding needs. And don't forget that Temasek is a major shareholder -- so SMRT ain't just going to cut dividend and store more cash. At 8.5 cents, the dividend yield now (stock price $1.76) ain't hot anyway at 4.8%. U would be better off buying REITs at 7-10% yield.
[hr]
[abb 22-12-2011]:

UBS has a good report this morning.

1. It assumes SMRT would incur a S$2-3m fine due to the breakdowns.

2. Repair and maintenance expenses are going to go up for keeps.

3. It cut FY12/13/14/15E EPS by 2.7%/3.5%/4.3%/9.4% respectively.

4. But dividend should be safe, for now unless public frustration does not simmer down. Then its generous dividend policy might be affected.

5. UBS Valuation: DCF-based price target cut to S$1.70 from S$1.85

Saw Phaik Hwa has resigned effective today "to pursue personal interests" --- wah, this sort of phrase qualifies to be of the widest meaning. It can be anything, so it has no meaning!

"This is the culmination of a discussion I began with the chairman in early December. I also feel it is important for me to stay on and support the relevant inquiries, and the transition to new leadership. I will also be supporting Ek Kia as he leads the organisation through its transition to a new CEO."

Change has come to Singapore --- Top jobs in public services companies are similar in 1 key respect to political appointments. The public can 'vote' you out of office by registering their wrath at severe lapses in service. It's clear that Saw Phaik Hwa's grip on her job could not be sustained in the face of public uproar over the train breakdowns and general discontent with SMRT's crowded trains.

Yesterday, at Queenstown MRT, I inserted a $50 note into a EZ-link Top-Up machine. The machine accepted my dollar note but this morning, I found that my EZ-link card only had a value of $2 !!! When I spoke to the MRT personnel, they said this happens all the time and I had to raise a 'Public Claim Form'...