Bearish outlook for SMRT remains despite Temasek's takeover plans

Upcoming train fare cut seen a major drag.

Despite recent news that Temasek's plan to take the transport operator private has been approved by SMRT's shareholders, RHB believes that its train business would struggle to make strong profits in the near term amidst rising cost of operations.

"SMRT will have limited headroom to grow revenue as fares continue to be determined by Public Transport Council (PTC)," said RHB.

PTC uses a formula, which is pegged to changes in the Core Consumer Price Index, the Wage Index and the Energy Index over the preceding year, to decide the public transport fares.

According to RHB, the upcoming public transport fare review could lead to as much as 5.7% cut in train fares from April 2017