SMRT

[winston]

not vested

SMRT cheapest education stock on Bursa: CIMB Research

KUALA LUMPUR: CIMB Equities Research believes that SMRT is the cheapest education stock on Bursa Malaysia.

It said on Friday with 80% recurring revenue and a projected 35% to 50% three-year EPS CAGR, in turn supported by its medical university and English language teacher training contracts, this under-researched gem is poised for a re-rating.

CIMB Research said SMRT is trading at only 9 times to 11 times FY16 price-to-earnings (P/E).

“Assuming SMRT’s FY16 net profit to be around RM21mil to RM27.5mil (without Pro ELT and with Pro ELT) and pegging the value of the stock at 16 times FY16 P/E (in line with the education sector), it could trade up to RM1.04 to RM1.38, giving investors 40-86% upside.

“Potential re-rating catalysts are its transfer from the ACE Market to the Main Board and award of the Pro ELT contract,” it said.

Source: The Star

[winston]

not vested

0117 SMRT (SELL)
Unexpected earnings reset

Management indicated at a meeting last Friday that its deployment pace for TNB is expected to slow materially in the coming years, following the opening up of TNB’s SCADA vendor base.

This came as a negative surprise and indicates a sharp earnings reset, given that c.38% of group earnings were previously driven by one-off deployment revenue.

The anticipated step-down in TNB's contribution invalidates our prior BUY thesis.

Accordingly, we cut FY26F/FY27F/FY28F earnings by 18%/41%/44%, respectively.

Following the earnings reset, we rebase SMRT’s valuation to 8x P/E (from 20x) to reflect the potential earnings void as TNB’s recurring income base approaches expiry over the next three years.

We downgrade the stock to SELL (from Buy) with a lower TP of RM0.32 (from RM1.24).

Source: HLIB