atans1

SMRT: DBS Sec report

In Temasek on 19/07/2016 at 1:31 pm

Actually since the report thinks the share at 1.54 is way above its analyst’s target price (1.28), anti-PAPpies and rational analysts (like me) should be upset if Temasek bids at last traded price or more. Waste of taxpayers’ money. Dr Goh, Hon Siew Sen, Lim Kim San and Harry must be crying that anyine can think such a tot.

Analyst comment on speculated takeover.

– Temasek said to unveil buyout offer for SMRT
– Potential offer could derail our current fundamental-based investment thesis
– Assuming at 30% premium to our current TP equates to 8% premium to last traded price

According to news report, Temasek is said to weigh the options of taking SMRT private.

The potential valuation is unclear given that with the unveiling of the New Rail Financing Framework, we are projecting that SMRT profits will take a notch down given the cap on margins for its SMRT train operations (inclusive of rental and advertising under trains).

We have just revised down our forecasts and trimmed our recommendation (to Fully Valued, TP: S$1.28, from Hold, TP: S$1.53). The potential buyout offer will derail our thesis, which was based on fundamental perspective.

Assuming a minimum of 20% premium to our TP, this leaves marginal premium to its last traded price. However, we believe a significant premium to last trade price could be challenging as this will equate to a very high valuation, considering that SMRT’s profitability is projected to be subdued under the New Rail Financing Framework.

At this juncture, our take is that a 25% – 30% premium to our TP seems probable as it will equate a marginal premium to last traded price of S$1.54.

 

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