Monday, April 30, 2012

SMRT's Q4 profit drops 59%

SINGAPORE - Singapore's main subway operator SMRT Corp Ltd reported on Monday a 59 percent drop in fiscal fourth-quarter net profit, hurt by higher operating expenses and impairment of goodwill on its bus operations.
The company earned S$13.9 million in the three months ended March, down from S$34 million a year earlier.

SMRT declared a reduced final dividend of 5.70 Singapore cents compared with 6.75 cents a year ago.

SMRT shares have fallen around 7 percent since it said last week it would spend S$900 million to overhaul the train system following numerous breakdowns in recent months. Part of the cost will be borne by the government's Land Transport Authority (LTA).

"We are still in discussion with LTA on cost-sharing arrangements," interim CEO Tan Ek Kia said in a statement.

Under Singapore's regulatory framework for public transport, LTA owns the assets but SMRT is responsible for the operation and maintenance of the train system.

Looking ahead, SMRT said it expects revenue to rise in the next 12 months due to the expected rise in train and bus ridership. But earnings will be hurt by higher repair and maintenance costs, as well as expenses on energy and staff.

Several analysts have downgraded the stock or cut their price targets on concerns such as higher operational costs, regulatory risks and uncertainty surrounding the appointment of a new chief executive.

Out of 17 analysts covering the stock, 10 have sell or strong sell ratings, four have hold recommendations, while the remaining three have buy or strong buy calls, according to Thomson Reuters data.

SMRT shares fell 0.3 percent to close at S$1.68 on Monday.

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