CIMB cuts SMRT target to $1.87 vs $2.03

Stock Name: SMRT
Company Name: SMRT CORPORATION LTD

Research House: CIMB

Price Call: SELL

Target Price: 1.87

CIMB Research has lowered its target price for Singapore’s public transport operator SMRT Corporation (SMRT.SI) to $1.87 from $2.03 and kept its underperform rating.

Singapore’s Public Transport Council has allowed public transport operators to increase fares for buses and trains by 1%.

CIMB said a one percent fare hike will not offset high energy and staff costs, which had surged 32.7% and 10.9% respectively in the first quarter of fiscal 2012. 

SMRT is caught between limited pricing power and stubbornly high costs," said CIMB in a report.

The brokerage has cut its earnings per share estimate for SMRT in 2012-2014 by 6-8%, and said further cost pressure may stem from higher frequency of train runs.

At 11:20 a.m., shares of SMRT were 4.5% lower at $1.715, and have dropped 15.5% since the start of the year.