SMRT's rising status as a landlord

Revenue growth from all segments except for taxi rentals. Top line revenue rose 9.6% yoy while net profit rose 8.5% to $163m but bottom line was boosted by S$4.6m income tax write-back. Excluding that, bottom line would have been broadly in line with ours and consensus forecast. A final dividend of 6 cents(one-tier tax exempt) was proposed, bringing total dividend payout to 7.75cents per share.

Taxi and LRT operations in the red but rentals profits grow 39%. Taxi operations did not break even in FY09,due to a loss on the disposal of taxis. similarly LRT operations did not break even, though losses were narrowed to just $0.2m. However rental revenue grew 37% due to redevelopment of commercial spaces at various MRT stations with operating profit growing at a slightly better 39%. Advertising revenue meanwhile contined to grow at 14%, suggesting that SMRT is gaining market share at the expense of traditional media. Engineering services grew 55% due to higher diesel sales and maiden project fees from Dubai.

FY10 will be see lower average ticket prices for railand bus operations due to previously announced fare reduction and rebates. We are forecasting a 4.6% reduction in average rail fares along with a 5.0% increase in rail traffic. Rental operations are expected to improve due to increase in lettable space while taxi operations was guided to be "challenging". We have a BUY recommendation on the stock with a $1.86 target price.

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