SMRT FY2010 profit up 0.1% at S$163mln

Yet results disappointed analysts as company's total operating expenses increased 10% during the global recession.

SMRT's 4Q10 revenues were up 3.7% y-y to S$225.1m, while net profit was down 41.4% y-y to S$22.7m. For FY2010 revenues came in at S$938.2m (+3.6% y-y), which was slightly ahead of expectations of S$932 due mainly to higher riderships, higher rental revenues and fees from overseas projects. Operating expenses has taken its toll on SMRT as total operating expenses increased 10.1% y-y to S$206.6m due mainly to higher staff costs, higher maintenance and repair costs. This came as a surprise as FY2010 was supposed to result in lower operating costs due to the global recession. As a result, net profit edged up marginally to S$162.8m (+0.1% y-y), according to a Phillip Securities Research report.

SMRT announced a final dividend of 6.75 cents bringing the total dividends for FY2010 to 8.5 cents, this is much higher than the 7.75 cents for FY2009. The dividend increase was on the back of flat earnings growth which means payout was much higher for 2010.

Analysts at Phillip Securities are forecasting revenues to increase by 7% to S$1.0 billion to reflect the higher earnings from higher ridership numbers, higher rental and advertisement. Train riderships are expected to grow as circle line stage 1 & 2 start to contribute with LTA forecasting daily riderships to reach 200,000 eventually and average fares will likely edge up.

They are also expecting rental and advertising segment to grow strongly in 2011; the opening of Esplanade Exchange and various circle line stages coupled with the better economic outlook will generate more space and higher rates. Advertising will likely benefit from the upcoming Youth Olympics, World Cup and the opening of 2 integrated resorts. However operating costs will likely be higher with the increased headcount, higher electricity prices and cessation of the budget assistance package.

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