OCBC Investment Research believes the recent pricing in of potential fare cuts in SMRT's share price was “most certainly overdone, and the current price level has become attractive with total upside of 28%”.
Singapore's transport minister recently said that bus and train fares will be reduced by 1.9% for a one year period to reflect lower energy costs.
In an Aug 26 report, analysts Eugene Chua and Andy Wong note that with the transition to the bus government contracting model kicking in only in 2H2016, and the bus segment representing only a fifth of group revenue, the fare cuts would have a negative impact on SMRT’s growth in the near time.
While the duo has cut earnings forecast for FY16 and FY17 by 5% and 9% respectively, they remain positive on the eventual transition into the new rail financing framework, despite the lack of concrete confirmation.
OCBC is maintaining a “buy” recommendation on SMRT, with a lowered fair value of $1.45 from $1.70 previously.
SMRT is up 2.9% to $1.245 at 9.53am.
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Singapore's transport minister recently said that bus and train fares will be reduced by 1.9% for a one year period to reflect lower energy costs.
In an Aug 26 report, analysts Eugene Chua and Andy Wong note that with the transition to the bus government contracting model kicking in only in 2H2016, and the bus segment representing only a fifth of group revenue, the fare cuts would have a negative impact on SMRT’s growth in the near time.
While the duo has cut earnings forecast for FY16 and FY17 by 5% and 9% respectively, they remain positive on the eventual transition into the new rail financing framework, despite the lack of concrete confirmation.
OCBC is maintaining a “buy” recommendation on SMRT, with a lowered fair value of $1.45 from $1.70 previously.
SMRT is up 2.9% to $1.245 at 9.53am.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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