OCBC Securities 2015-08-14: ComfortDelgro - 1H15 broadly within expectations. Maintain HOLD.


ComfortDelGro: 1H15 broadly within expectations 

 Stable 2Q15 results
 Stability on diversified revenue base
 No surprises; maintain HOLD

Steady 2Q15 performance 

  • ComfortDelGro (CDG) continued its steady growth in 2Q15 as PATMI increased 6.9% YoY to S$80.9m on the back of a 2.1% growth in revenue to S$1.04b, driven mainly by Bus (+4.1%), Rail (+6.8%) and Taxi (+3.3%) segments, but partially eroded by weaker AUD and GBP against SGD. 
  • 2Q15 operating expenses rose 2.2% YoY to S$916.3m mainly from higher staff costs (+3.1%), depreciation (+9.2%) and contract services costs (+7.2%) but offset by lower fuel and electricity costs (-10.2%) and lower materials and consumables (-8.9%). 
  • Consequently, 1H15 results were within expectations as revenue grew 1.7% YoY to S$2.0b, while PATMI rose 6.8% to S$148.5m and formed 48.4% of our FY15 forecast. The proportion of overseas contributions declined YoY, likely due to weaker currencies. 

Stable growth from diversified revenue base to sustain 

  • Looking ahead, we continue to expect CDG to record stable growth with diversified revenue base as management guided for revenue from CDG’s bus, rail and taxi segments to increase. 
  • Bus segment growth continues to be driven by: 
    1. higher ridership and fares in Singapore, 
    2. new routes and service enhancements in UK to offset weaker GBP, 
    3. contribution from Blue Mountains bus services in Australia to offset weaker AUD. 
  • We also note for Singapore bus segment, this operation will turn sustainably profitable on stable margins post transition to the new bus government contracting framework from 2H16 onwards. 
  • For the rail segment, growth is likely to come from higher ridership due to: 
    1. more new trains to be added to the North-east Line (NEL) in FY15, and 
    2. Downtown Line Phase 2 (DTL2) is on track to open by Dec 15 and is likely to contribute significantly. 
  • For taxi, we expect fleet expansion and renewal of taxi fleet in Singapore to drive taxi revenue growth through higher rental income. 

Strong balance sheet; maintain HOLD 

  • Stability is a key characteristic of CDG and we like its diversified revenue base and strong balance sheet. 
  • With an in-line set of 1H15 results, we keep our forecasts unchanged. Maintain HOLD with the same FV of S$3.07. 

Eugene Chua | http://www.ocbcresearch.com/ OCBC Investment Research 2015-08-14
HOLD Maintain HOLD 3.07 Same 3.07