SMRT - Proxy for Property

I read with interest the commentary by Christopher Tan on the Straits Times regarding SMRT as a possible proxy property counter.

SMRT is currently trading at a Price Earnings Ratio (P/E) of 20 compared to Comfort Delgro's 14.5 and SBS Transit's 10.3.

Its primary business include running the Mass Rapid Transit (MRT) train system in Singapore (which includes the North South line, East West line and the Circle Line), bus business and taxi business. Lately, it has been involved in rental business.

In the financial year ended Mar 31, 40 percent of MRT's takings came from rental income. That amounted to a total of $51 million in operating profit.

While its bus and taxi business is not performing on par, it seems that its rental income has improved its profit margins by quite a fair bit.

As such, Christopher Tan suggests that SMRT might no longer be a pure transport play but instead could serve as a proxy to the property market, thus justifying its higher P/E ratio.