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Broker's take: DBS Equity Research maintains 'buy' on SMRT

DBS Equity Research in a report on Monday reiterated its "buy" call on shares of SMRT with a target price of S$1.90.

SMRT's Q3 FY2015 net profit of S$22.6 million - a year-on-year increase of 59 per cent - is "tracking well", while its fare business earnings before interest and tax (Ebit) of S$1.9 million - compared to a loss of S$8.9 million in Q3 FY2014 - is "tracking within expectations", said analyst Andy Sim.

That the Public Transport Council (PTC) recently approved a 2.8 per cent fare increase, effective from April 5, should provide support to SMRT's bottomline, Mr Sim added. "We have factored this in, and are currently projecting a 22 per cent net profit growth in fiscal year-end March 2016. We have also pencilled in a 1 per cent fare decline in 2016," he wrote in the report.

Moreover, oil prices have corrected to below US$50 per barrel from above US$100 per barrel just about six months ago. "We expect SMRT to continue to benefit through lower diesel and electricity costs," said the report.

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