July 2009

Result Announcement

• 13-Jul-09 : SPH (Q309) - EPS 8ct (todate 18ct)
• 16-Jul-09 : M1 (Q209)
• 5-Aug-09 : StarHub (Q209)
• 13-Aug-09 (AM) : MIIF (1H09)
  

STI = 2266.64 (-41.34)

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SPH	FY08 : Aug	27.0	S$3.21	8.411%	11.89	Interim 8ct ; Final 9ct + 10ct (Special)
SingPost	FY09 : Mar	6.25	$0.87	7.184%	11.26	Q1 1.25ct ; Q2 1.25ct ; Q3 1.25ct ; Q4 2.5ct
STI ETF	Dec-08	5.0	S$2.31	4.329%	--	Dec-08 5ct ; Jun-08 6ct
STEng	FY08 : Dec	15.8	S$2.47	6.397%	15.61	Final 4ct + 8.8ct (Special) ; Interim 3ct

Transport

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SBSTransit	FY08 : Dec	6.6	S$1.63	4.049%	12.36	Interim 3ct ; Final 3.6ct
ComfortDelgro	FY08 : Dec	5.0	S$1.32	3.788%	13.76	Interim 2.6ct ; Final 2.4ct
SMRT	FY09 : Mar	7.75	S$1.76	4.403%	16.45	Interim 1.75ct ; Final 6.0ct

TELCO

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SingTel	FY09 : Mar	12.5	S$3.12	4.006%	14.40	Interim 5.6ct ; Final 6.9ct
M1	FY08 : Dec	13.4	S$1.58	8.481%	9.40	Interim 6.2ct ; Final 7.2ct
StarHub	FY08 : Dec	18.0	S$2.13	8.451%	11.65	Q1 4.5ct ; Q2 4.5ct ; Q3 4.5ct ; Q4 4.5ct

Funds / Infrastructure

Stock	Period	DPS ct	Price	Yield	NAV	Div Breakdown
SPAus	2H : Mar-09	A5.6578	S$0.85	15.078%	A$0.89 (NTA)	2H A5.6578ct ; 1H A5.7431ct
MIIF	2H : Dec-08	3.0	S$0.315	19.048%	$0.89	2H 3.0ct ; 1H 4.25ct
MacCookPSF	Q2 : Dec-08	A1.0 (Gross)	S$0.135	33.559%	A$0.5168 (NTA)	Q209 A1.0ct ; Q109 A1.75ct

* SPAus and MacCookPSF DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.1326) fm Yahoo

NOTES :

• Mkt Price is as on 13-Jul-09
• SingTel : Q409 (Mar09) - Final 6.9ct ; Q209 (Sep08) - Interim 5.6ct
• SPAus : Projected DPU = A8ct (FY10 - Year End Mar-10) ; 1-for-4 Rights @ A$0.78/S$0.86
• SPAus : 2H09 (Mar09) - AA5.927ct (before tax) / A5.6578ct (after tax) ; 1H09 (Sep08) - A5.927ct (before tax) / A5.7431ct (after tax)
• MacCookPSF : Q309 (Mar09) - DPU Decision Deferred, SGX 15-Jun-09
• StarHub : Q109 (Mar) - 4.5ct
• SingPost : Q409 (Mar09) - 2.5ct ; Q309 (Dec08) - 1.25ct ; Q209 (Sep08) - 1.25ct ; Q109 (Jun08) - 1.25ct
• SMRT : Q409 (Mar09) - Final 6ct ; Q209 (Sep08) - Interim 1.75ct
• SPH : 1H09 (Feb) - 7ct
• ST Engg : Q408 (Dec) - 4ct (Final) + 8.8ct (Special) ; Q208 (Jun) - 3ct
• ComfortDelgro : Q408 (Dec) - 2.4ct ; Q208 (Jun) - 2.6ct
• SBSTransit : Q408 (Dec) - 3.6ct ; Q208 (Jun) - 3ct
• StarHub : FY09 Div Policy 18ct ie 4.5ct/Q
• M1 : 2H08 (Dec) - Final 7.2ct ; 1H08 (Jun) - Interim 6.2ct
• MIIF (Dec) : 2H08 ; 3.0ct ; 1H08 (Jun) - 4.25ct

SPAusNet - The Australian

SP AusNet boss's pay leaps 60pc as profit plunges


SINGAPORE-BACKED SP AusNet has defended a 60 per cent jump in annual remuneration for its managing director despite a fall in the company's security price and profit over 2008-09.

Stapled security holders gathered yesterday for the company's annual general meeting in Melbourne to vote on its remuneration report and other resolutions and to hear a yearly update from its key executives.

SP AusNet remuneration committee chairman George Lefroy told the meeting he was aware of investor concerns about the plan to increase managing director Nino Ficcau's annual pay.

"I would like to acknowledge security holder and community concern and interest in executive remuneration particularly in these challenging times," Dr Lefroy said.

There was an outcry in May when SP AusNet, which is backed by Singapore Power and runs Victoria's high-voltage electricity transmission network, said it would award Mr Ficca a $412,461 cash bonus, despite the utility posting a 6.7 per cent dip in its net profit for this financial year.

Dr Lefroy told shareholders yesterday Mr Ficca had been rewarded for "operational excellence" and the role he played in developing business strategy and "guiding and driving specified business outcomes".

Mr Ficca's total reportable remuneration for 2008-09 had risen by 60 per cent to $2.4 million, from $1.5m last financial year, he said. "The key reason for this increase is the long-term incentive plan," Dr Lefroy said.

He stressed that the reportable remuneration was not the same as take-home pay because it included accounting valuations for current and historical equity grants that may or may not materialise.

The managing director's remuneration package included fixed remuneration of $802,000 an on-target short-term incentive of $401,000 in cash, and a maximum long-term incentive payment of about $750,000, which he must convert on-market into securities.

Dr Lefroy he said a review in May last year showed a correction was needed in directors' fees and the salaries of the managing director and other executives, for it to remain competitive.

The remuneration jump for Mr Ficca comes despite the company's stapled securities price falling to 88.6c at the end of its March year, from $1.20 a year previously. SP AusNet shares fell 0.5c yesterday to 77c. Despite the protests, security holders later voted in favour of the company's remuneration report.

Mr Ficca told the meeting his company report card for the year had included a number of positive achievements.

The net profit result, the connection of 26,400 new customers, the refurbishment and upgrade of key transmission stations and a high level of customer satisfaction were among the year's highlights, he said.

SP AusNet's power infrastructure was affected by the fatal Victorian bushfires earlier this year. Some Kinglake residents affected by the fires have launched a class action against SP AusNet, alleging faulty power lines started some of the blazes. The firm is defending the claim.

SMRT - UOBKH

Still Worth Paying For


Still worth paying for. SMRT Corporation (SMRT) has, over the last 18 months, been trading at about 23.5% over and above the sector average, based on the PE metric. Even on a P/B basis, the stock is not cheap, trading at 3.6x P/B (though this is largely due to its low fixed asset base). However, the stock is still worth paying for, given its strong margins that outshine that of sector peers, outstanding return on assets (ROA), sustainable dividend payouts based on solid earnings, and its ability to leverage on the Singapore growth narrative.

Growth potential not yet exhausted. We view SMRT as a play on Singapore’s growth trajectory, and the rail system as the biggest beneficiary of the government’s push to nudge commuters and peak hour traffic towards public transport. The rail system is, by far, the best alternative transport method to avoid congestion on roads.

Stronger operating performance than peers’. We compare SMRT and sector comparables and find that the company commands the highest margins and ROAs among listed land transport operators. SMRT also has the added silver spoon advantage of lower capex due to strong government support.

Maintain BUY; target price raised to S$2.00. We have lowered our profit forecasts (by between -5.1% and -6.3%) and changed our valuation methodology from PE to discounted cash flow. We value SMRT using the firm’s discounted free cash flow to equity at S$2.00/share (6.9% COE, 1% terminal growth). Our revised target price (up from S$1.86) gives a return of 17% over the last closing price of S$1.71.

SMRT - JPM

Circle Line operating performance may see upside


• Circle Line ridership could surprise on the upside: The Circle Line (CCL) attracted a daily ridership of about 30,000 – 35,000 during its first week of operations since the 5-station, phase 3 of the 29-station lines opened in May 2009. This is better than our estimate of 25,000. The remaining phases will be opened from 2010. With the CCL being a “transfer line” cutting across the other lines, it should be able to capture a good amount of ridership share.

• Might be net beneficiary of centralized bus planning: SMRT’s bus network currently spans the less densely populated areas of Singapore. The LTA is in the process of re-planning the whole bus network under its centralized bus planning exercise. SMRT could emerge a net beneficiary from this exercise, as routes get redistributed so that it could have a chance of securing the more lucrative bus services.

• Retail space rental earnings could see slower growth: Retail space rental experienced phenomenal growth in the past on the back of aggressive refurbishment of existing stations and the conversion of bigger underground stations into “Xchanges” housing more retail shops. Going forward, we believe that the growth from this segment could plateau as the CCL is fully underground and the stations are smaller, translating to less lettable retail space. This segment currently contributes about 23% of SMRT's operating profits and is the second largest profit contributor after the core MRT business.

• Valuation, risks: At 15.4x FY10E P/E, we believe the stock is fairly valued, trading above its historical mean forward P/E of 13.5x. Upside risks could come from the CCL breaking even faster than the FY 2013E in our assumption.

STEng - BT

ST Engg lines up US$1.2b medium-term note funding

Rated AAA by S&P, it will allow ST Engg to 'pursue opportunities'


SINGAPORE Technologies Engineering (ST Engg) has set up a US$1.2 billion multi-currency medium term note programme 'as a pre-emptive measure' to diversify its funding options.

'The programme provides us with the agility to quickly raise funds to pursue opportunities, should the need arise,' said president and chief executive officer Tan Pheng Hock.

The medium-term notes programme was set up through a wholly owned subsidiary. The notes will be 'irrevocably and unconditionally guaranteed' by ST Engg and the programme has been rated triple-A by Standard & Poor's Rating Services, which also has a triple-A rating on the company's corporate credit.

'The 'AAA' rating on ST Engg reflects our opinion that there is an extremely high likelihood that the government of Singapore would provide timely and sufficient extraordinary support to ST Engg in the event of financial distress,' said Standard & Poor's credit analyst Wee Khim Loy, noting that Singapore's Ministry of Defence is the company's largest customer. 'We assess the stand-alone credit profile of ST Engg to be 'AA'.'

Moody's is expected to release its rating soon, ST Engg said. Deutsche Bank and Morgan Stanley are the joint lead arrangers.

The company said money raised from the issue of notes will be used to fund new capital expenditures, acquisitions, for general corporate services and refinancing of existing borrowings.

As at March 31, the latest period for which data is available, ST Engg had short-term borrowings of S$249.5 million, down from S$586.7 million at Dec 31, 2008. However, total borrowings was S$912.7 million, up from S$881.4 million in December.

Separately, ST Engg said yesterday that it had won a S$26.5 million contract from the Land Transport Authority to maintain electrical and mechanical systems in the Kallang Paya Lebar Expressway. The contract was awarded to ST Synthesis, a wholly owned subsidiary.

ST Engg closed at S$2.41 yesterday, down 3 cents or 1.2 per cent on volume of 1.45 million units.

Land Transport - DB

Expect 2H ridership to be stronger


January-May ridership growth affected by economic slowdown
YTD, average rail ridership has increased 3.7% YoY to 1.7m, while bus ridership has declined 0.7% YoY to 3.1m. We predicted growth of 6.4% YoY in rail ridership and 4.2% YoY in bus ridership. We are upbeat that ridership figures could be stronger than expected in 2H09 given Deutsche Bank's forecast of a QoQ recovery in GDP. We maintain our positive view on the sector. We change our preference towards ComfortDelGro (CD) versus SMRT. CD is trading at a 20% discount to the market and offers 37% upside to our target price.

Higher YoY growth in ridership slightly below our forecasts
At SMRT (MRT SP; Buy; target price S$2.05), average daily rail ridership in May 2009 grew 2.5% YoY to 1.39m. On the margin, we are seeing higher YoY growth in May ridership compared to April (+2.3% YoY). Overall ridership numbers for rail and bus were at 2.9% YoY and -0.3% YoY, respectively. These are below our 2009 forecasts for rail and bus to increase by 6.0% and 4.7% YoY, respectively.

January-May ridership slightly below our expectations
ComfortDelGro’s (CD SP; Buy; S$1.75) average daily rail ridership in May 2009 grew 4.7% YoY to 0.35m, while its bus ridership declined 1.2% YoY to 2.26m. The trend continues to deteriorate due to the high base effect. We believe there could be a one quarter lag GDP and expect the turn in 3Q09. Overall rail ridership during January-May grew 6.9% YoY, slightly below our forecast for CD’s rail ridership to grow by 8% YoY in 2009. CD’s overall January-May bus ridership of -0.8% was below our forecast for bus ridership to increase by 4% YoY. We believe that lower oil prices could help buffer the slower ridership growth. Our analysis reveals that every 1% decline in oil could lead to a 0.6% increase in CD’s earnings.

Soft start to Circle Line (CCL) opening in May 2009
Circle Line, which opened towards the end of May 2009, had an average ridership of 30-35k per week. We believe the lower-than-expected ridership was due to the start of the June holidays. We forecast that CCL will operate at a minimal loss in the first year. Cost synergies at CCL could help SMRT reduce operating losses.

We now prefer CD over SMRT; reiterate Buy
We expect CD's earnings to rebound in 2009, as the company could benefit from resilient ridership and moderating costs due to lower oil prices. The stock is trading back at 2003 levels and offers exceptional value with the risk of earnings falling short. We expect the disparity between the stock’s valuation and the Straits Times Index (STI) to narrow on: 1) upcoming 2Q09 results (our forecasts are 6% above consensus), 2) further appreciation of the GBP and AUD, which could boost its overseas earnings, and 3) higher earnings from its overseas acquisitions.

Beneficiary of lower oil price, wage deflation, higher ridership and new rail
SMRT should benefit from: 1) a drop in oil prices, 2) lower staff costs, 3) resilient ridership growth, and 4) rental income stability due to long leases. We would be buyers on weakness in SMRT. The stock has outperformed the index by 7% in the past month. We will be tracking CCL’s ridership closely to see if the ridership figures can meet our expectations. SMRT is also likely to renew its electricity contract in July/August 2009.

SMRT - AmFraser

Investment Highlights

• We initiate coverage of SMRT Corp Ltd (SMRT) with a BUY rating. Fair Value of S$2.11 presents a 19% upside to current price. We have applied a DCF approach to SMRT’s
  steady cash flows, with terminal growth at 1% and netting off S$1bil for the 30-year licence extension and transfer of assets for the new Circle Line.


• Amid a slow economy, SMRT’s earnings are defensive with 80% revenue derived from the public transport fare business. We expect ridership growth on trains and buses to be supported, as costs of private vehicle usage continues to increase, while its rail and bus network continues to improve in terms of convenience (connectivity, shorter travel times and shorter headways) and affordability.


• We project 12% growth in mass rapid transport (MRT) ridership for SMRT to 572mil in FY10 and 9% to 623mil in FY11. This will offset average fare cut of 4.6% implemented from 1 April 2009 until end-June 2010.


• With the progressive opening of SMRT’s new Circle Line - first phase having started in May 2009 with 2nd phase in 2010 and 3rd phase in 2011 - we would expect some new
  comers to public transport. But the impact will be somewhat muted on incremental ridership as some rides on Circle Line may cannibalise rides from SMRT’s other two
  MRT lines. Early estimates put ridership on Circle Line’s first phase at 55,000 per day, rising to 0.5 million at a steady state upon full operations of the entire line.


• Lacklustre taxi operations will be offset by growth in rental and engineering/other services segments. SMRT will continue to redevelop its MRT stations into lettable commercial space, which are in high demand for its location in high pedestrian traffic areas. So far, SMRT has renovated about half of its stations.


• With oil prices off last year’s peak, SMRT stands to benefit as about 20% of its costs are energy-related items. As such we expect an improvement in EBITDA margins from 33% in FY09 to 34% in FY10. But we expect margins to revert to 33% in FY11 with increasing costs from further phases of the fully underground Circle Line.


• Steady cash flows can comfortably support capex of S$150mil per annum for continual upgrading and expansion of transport fleet, station renovations and other system and service improvements. This leaves enough room to maintain DPS at 7.75 cents Singapore per annum. In addition, we estimate a potential for paying out a special dividend of 1.5 cents in FY11 if management wishes to.

June 2009

STI = 2333.14 (+15.97)

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SPH	FY08 : Aug	27.0	S$3.16	8.544%	11.70	Interim 8ct ; Final 9ct + 10ct (Special)
SingPost	FY09 : Mar	6.25	$0.895	6.983%	11.58	Q1 1.25ct ; Q2 1.25ct ; Q3 1.25ct ; Q4 2.5ct
STI ETF	Dec-08	5.0	S$2.37	4.219%	--	Dec-08 5ct ; Jun-08 6ct
STEng	FY08 : Dec	15.8	S$2.45	6.449%	15.49	Final 4ct + 8.8ct (Special) ; Interim 3ct

Transport

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SBSTransit	FY08 : Dec	6.6	S$1.60	4.125%	12.13	Interim 3ct ; Final 3.6ct
ComfortDelgro	FY08 : Dec	5.0	S$1.28	3.906%	13.35	Interim 2.6ct ; Final 2.4ct
SMRT	FY09 : Mar	7.75	S$1.69	4.586%	15.79	Interim 1.75ct ; Final 6.0ct

TELCO

Stock	Period	DPS ct	Price	Yield	PE	Div Breakdown
SingTel	FY09 : Mar	12.5	S$3.00	4.167%	13.84	Interim 5.6ct ; Final 6.9ct
M1	FY08 : Dec	13.4	S$1.53	8.758%	9.11	Interim 6.2ct ; Final 7.2ct
StarHub	FY08 : Dec	18.0	S$2.14	8.411%	11.71	Q1 4.5ct ; Q2 4.5ct ; Q3 4.5ct ; Q4 4.5ct

Funds / Infrastructure

Stock	Period	DPS ct	Price	Yield	NAV	Div Breakdown
SPAus	2H : Mar-09	A5.6578	S$0.90	14.791%	A$0.89 (NTA)	2H A5.6578ct ; 1H A5.7431ct
MIIF	2H : Dec-08	3.0	S$0.365	16.438%	$0.89	2H 3.0ct ; 1H 4.25ct
MacCookPSF	Q2 : Dec-08	A1.0 (Gross)	S$0.14	33.611%	A$0.5168 (NTA)	Q209 A1.0ct ; Q109 A1.75ct

* SPAus and MacCookPSF DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.1764) fm Yahoo

NOTES :

• Mkt Price is as on 30-Jun-09
• SingTel : Q409 (Mar09) - Final 6.9ct ; Q209 (Sep08) - Interim 5.6ct
• SPAus : Projected DPU = A8ct (FY10 - Year End Mar-10) ; 1-for-4 Rights @ A$0.78/S$0.86
• SPAus : 2H09 (Mar09) - AA5.927ct (before tax) / A5.6578ct (after tax) ; 1H09 (Sep08) - A5.927ct (before tax) / A5.7431ct (after tax)
• MacCookPSF : Q309 (Mar09) DPU Decision Deferred - SGX 15-Jun-09
• StarHub : Q109 (Mar) - 4.5ct
• SingPost : Q409 (Mar09) - 2.5ct ; Q309 (Dec08) - 1.25ct ; Q209 (Sep08) - 1.25ct ; Q109 (Jun08) - 1.25ct
• SMRT : Q409 (Mar09) - Final 6ct ; Q209 (Sep08) - Interim 1.75ct
• SPH : 1H09 (Feb) - 7ct
• ST Engg : Q408 (Dec) - 4ct (Final) + 8.8ct (Special) ; Q208 (Jun) - 3ct
• ComfortDelgro : Q408 (Dec) - 2.4ct ; Q208 (Jun) - 2.6ct
• SBSTransit : Q408 (Dec) - 3.6ct ; Q208 (Jun) - 3ct
• StarHub : FY09 Div Policy 18ct ie 4.5ct/Q
• M1 : 2H08 (Dec) - Final 7.2ct ; 1H08 (Jun) - Interim 6.2ct
• MIIF (Dec) : 2H08 ; 3.0ct ; 1H08 (Jun) - 4.25ct