SMRT earnings growth gaining momentum


PETALING JAYA: SMRT Holdings Bhd can expect substantial earnings potential arising from the utility and financial services sectors, coupled with the growing recurring earnings base in the future.

Strong growth in new site deployments was seen in the first quarter of financial year 2024 (1Q24) and this will gain momentum in the coming two quarters.

This is so since utility companies typically spend the bulk of their capital expenditure towards the year-end, said Hong Leong Investment Bank (HLIB) Research.

SMRT had recently secured PLN Jakarta and Air Selangor contracts and they will further solidify the group’s earnings prospect, it added.

The research house maintained its “buy’’ call with an unchanged target price of RM1.38 a share. This is based on a 20 times price-earnings ratio on FY25 earnings per share of 6.9 sen.

SMRT entered four regions in Indonesia (Lampung, Nusa Tenggara Timur, Jawat Barat and Kalimantan Timur dan Utara) after securing PLN as a customer in the fourth quarter of 2022.

In 1Q24, it expanded its presence into the Jakarta district, marking its fifth regional win.

HLIB Research is also optimistic about this expansion, given Jakarta’s status as the largest city with the highest population in Indonesia.

The research house said the demographic suggested a significant number of distribution substations led by strong power demand in the area.

Having penetrated five out of 22 of Indonesia districts, HLIB Research expects more districts to come on board given SMRT’s track record.

Meanwhile, SMRT has established a wholly owned subsidiary in the Philippines as part of its plan to expand into the country’s utility and financial services sectors which share analogous challenges with the Indonesian market.

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