SMRT Corporation remains an "unattractive" investment: OCBC

Because of share price vulnerability.

According to OCBC, SMRT Corporation "remains an unattractive investment at this juncture as it remains susceptible to downside moves in response to bad press and/or service disruptions."

The research firm's pronouncement came as SMRT announced a dismal set 2QFY14 results, with net profit falling 57% yoy to S$14.3 on the back of higher staff costs and depreciation expenses.

While revenue grew 5.3% yoy to S$2963m from higher rail and bus ridership, this could not offset the ballooning operating costs.

OCBC said SMRT's weakness will persist for the remainder of the year: "The lack of a fare increase will ensure the continued gap between top-line growth and operating expenses for the time being, and we expect SMRT’s 2HFY14 operating profit to fall further. We also do not foresee a change in its operating model to new rail financing framework in FY14.

A silver lining for SMRT Corporation is that its its share price is not expected to slide further "as its woes have been well-documented over the past year" and already tekn into account by the street, said OCBC. Still, the aforementioned susceptability to negative news should keep investors wary.

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