SMRT issues profit warning: Q4 will be in the red

Listed transport operator SMRT Corp said Thursday that the company expects to post a net loss for the fourth quarter ending March 31, 2013.

"Increasing operating costs without corresponding fare adjustments have adversely affected the group's profitability," it said in a statement to the Singapore Exchange, adding that it is also registering a $17 million impairment of goodwill in Chinese associate Shenzhen Zona Transportation.

The group will, however, remain profitable for the full year ending March 2013, SMRT said. It posted a net profit of $95.2 million for the first nine months, down 10.1 per cent.

SMRT's net earnings for the previous fourth quarter (March 2012) stood at $13.9 million, a 59 per cent drop. Full-year earnings for 2012 came in at $119.9 million - 25.6 per cent lower.

Nomura researcher Chan Wen Jie said he was expecting an impairment for Shenzhen Zona, but did not have the exact amount. He was forecasting a full-year net profit of $110 million before impairment.

"Dividends are at risk," Mr Chan said in a report. "The question remains as to whether the company will pay out dividends based on the normalised profit or the actual reported profit."

Nomura has lowered the target price of the SMRT stock to $1.35, from $1.57. SMRT has been trading at its lowest level in over two years. It closed at $1.58 on Wednesday, down 1.5 cents.

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