Broker's take: OCBC keeps 'buy' on SMRT, cuts target price

OCBC Investment Research has maintained its "buy" call on SMRT Corp, but lowered its forecast to account for expected fines from recent train disruptions.

OCBC cut its fiscal 2016 profit after tax and minority interests forecast by 10.5 per cent, to S$101.4 million, on expectations of higher expenses and fines for the train operator. The broker lowered its target price for the stock to S$1.85 from S$1.90.

Train services on the North South, East West and Circle Lines experienced five disruptions over the past two weeks. The Land Transport Authority has said that those disruptions were unacceptable, raising the possibility of fines.

SMRT has announced plans to improve rail reliability, which will add to expenses over the next few years. But OCBC said that growth catalysts remain, including lower energy costs, full-year rental income in FY16 from the Kallang Wave mall, and a restructured public bus framework.

"We reiterate 'buy' on SMRT on positive growth outlook," OCBC wrote.

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