Hot Stock: SMRT gains nearly 6% in early session

SMRT Corp gains 8.5 Singapore cents or nearly 6 per cent to S$1.57 in the early session.

The firm announced last Friday an impressive set of results for second quarter ended September - net profit jumped 76 per cent to S$25.3 million on the back of a 6 per cent rise in revenue to S$314.0 million from a year ago.

The improved results were led by better performance in its train and bus operations, as well as higher profitability from its taxi, rental and advertising businesses.

OCBC Investment Research has upgraded the counter to a "buy" as the research house believes that the current level of earnings is sustainable if management continues to maintain profitability in its fare business.

For the period under review, SMRT's fare business turned profitable from operating losses of S$6.8 million and S$1.1 million in the second quarter of FY2014 and the first quarter of FY2015 respectively to an operating profit of S$5.5m in the second quarter.

There are other positives.

"With the recent oil price slide, we expect further improvements to SMRT's bus and rail operating margins since electricity and diesel costs constitute an average of 16 per cent of total expenses," said OCBC.