• Issuing a clarification to our most recent results report, dated 30 January 2015.
• SMRT expects that the first bus package will be implemented in May 2016, 4-months ahead of the termination of SMRT's BSOL.
• Maintained at "Reduce" rating, with target price of $1.54.

Clarification

First bus package transitions to the new Government Contracting Model (GCM) – SMRT expects that the first bus package will be implemented in May 2016. This is 4-months ahead of the termination of SMRT's Bus Service Operator's Licence (BSOL). SMRT was granted a 10-year BSOL on 1 September 2006, and we had expected the transition of the entire bus network to occur simultaneously in September 2016.

What we got wrong

Interpreted that the entire bus network transitions in May 2016 – In our previous report on SMRT, we had incorrectly interpreted that the transition to the Government Contracting Model would apply to the entire bus network in May 2016. The announcement was referring only to the first bus package.

Apologise for the error – We apologise to clients and investors for the error and misunderstanding in the previous report.

Investment Actions

We still do not favour SMRT stock for its non-existent cash generating ability, lack of clarity on the transition to the new Rail Financing Framework (RFF) and limited inorganic growth opportunities due to its weak balance sheet. Maintained at "Reduce" rating, with target price of S$1.54.

Source: Phillip Securities Research - 4 Feb 2015