SMRT (S53.SG) is +0.5% at $2.03, tracking mild gains by most other Singapore large caps, but continues to consolidate in a tight band with a downward bias after coming off from a $2.34 52-week high achieved in July.

The stock has lost 9.0% since the start of 2H10, vs the STI +10.5%, after the rail operator warned of a lower profit for its current FY ending March given higher operating costs and continuing losses from its Circle Line.

“We expect SMRT’s margins would take a hit from higher staff and fuel costs from opening the next three stages of the Circle Line network over the next 12-18 months,” says Macquarie, which has an Underperform call with a $1.75 target; “this is why SMRT’s revenue growth would not translate into earnings growth over the next two years.”

Resistance is expected at the 100-day moving average, last at $2.05.