SMRT Sinks to 7-Month Low on Spending: Singapore Mover

(Corrects expense figure in third paragraph.)

SMRT Corp. (MRT) fell to a seven-month low in Singapore on concern capital expenditures will increase after the country’s worst subway breakdown in December and as the company reported smaller-than-expected profit.

The country’s biggest subway operator slumped as much as 3 percent to S$1.63, the lowest intraday price since Oct. 5, and traded at S$1.65 as of 10:18 a.m. in Singapore. The stock has retreated 6.8 percent this year, compared with a 13 percent rise in the benchmark Straits Times Index. (FSSTI)

SMRT plans to spend about S$500 million ($405 million) in the year ending in March, which includes a small portion of the S$900 million that will be used over the next few years to upgrade the country’s 25-year-old train system. Expenses from the December disruptions totaled S$3 million in the January- March period, the company said.

“We expect net debt to rise to over 80 percent of equity by the 2014 fiscal year as capital expenditure exceeds operating cash flow,” Robert Kong, a Singapore-based analyst at Citigroup Inc., said in a note dated April 30. “We sense more drastic actions are needed, perhaps raising capital to shore up finances.”

Photographer: Jonathan Drake/Bloomberg

Passengers ride one of Singapore's subway trains in Singapore. Close

Passengers ride one of Singapore's subway trains in Singapore.

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Photographer: Jonathan Drake/Bloomberg

Passengers ride one of Singapore's subway trains in Singapore.

SMRT will look into raising funds for the train upgrading plan if needed, by tapping into its medium-term note program, Catherine Lee, chief financial officer, said on April 30. The company is still in discussions with the Land Transport Authority of Singapore on how much of the S$900 million will be shouldered by the train operator.

The company reported net income of S$13.9 million in the quarter ended in March because of a goodwill impairment charge on its bus business and higher costs. That is lower than the S$38 million estimated by Citigroup.

The December breakdowns, which affected about 200,000 passengers, led the government to review its regulatory and penalty framework. Saw Phaik Hwa stepped down as the company’s chief executive officer on Jan. 6 after the disruptions on Dec. 15 and 17 affected shoppers in the Orchard Road shopping belt in the last weekend before the Christmas holiday.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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