The $1.18 billion offer by Temasek Holdings to take SMRT Corp private has won another tick of approval.

Influential proxy advisory firm Institutional Shareholder Services (ISS) has recommended that institutional investors accept the offer for the mainboard-listed transport operator.

ISS said in a report yesterday "the valuation for the company's shares is generally in line or above the valuation for comparable companies and precedent takeovers".

The advisory firm noted that the offer of $1.68 per share is "a premium of 8.7 per cent to the unaffected price of the company's shares".

The unaffected price is usually the closing price one day before major announcements of offers are made. For SMRT, the most recent closing price was $1.545.

The offer price of $1.68 is 8.7 per cent above that level.

July 15 was the last trading day before a requested trading halt, pending the announcement of the new rail financing framework announced by the Government, and SMRT's proposed privatisation.

Under the framework, SMRT will sell its rail assets to the Land Transport Authority for almost $1 billion.

Temasek had announced the buyout offer on July 20. Earlier this month, the offer was also deemed "fair and reasonable" by independent financial adviser Rothschild.

SMRT's independent directors then had agreed with the findings and "unanimously" recommended that shareholders vote in favour of the buyout.

The advisory firm made the recommendation by looking at different metrics including the price-to-earnings (PE) ratio, and the enterprise value (EV) to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio.

Temasek's offer price was 24.5 times of SMRT's PE ratio, and 9.3 times of its EV to Ebitda ratio.

ISS also noted that the offer price provides "an assurance of value" for shareholders, on the back of "uncertainties from the impending overhaul of the company's rail operations financing framework".

SMRT shares closed flat at $1.655 yesterday.