ComfortDelgro - DBS Research 2015-11-16: Awaiting a more comfortable ride

ComfortDelgro - DBS Research 2015-11-16: Awaiting a more comfortable ride COMFORTDELGRO CORPORATION LTD C52.SI 

ComfortDelgro - Awaiting a more comfortable ride 

Maintain HOLD, TP maintained at S$3.00. 

  • We maintain our HOLD recommendation for ComfortDelgro (CD) with a TP of S$3.00, based on an average of PE and DCF valuations. 
  • CD’s share price has outperformed the broader market YTD, which we believe has priced in positives from potential changes to policies. 

3Q15 results steady as expected. 

  • Net profit registered a 5.4% y-o-y increase to S$85.2m. 
  • Operating costs increased by a tad slower at 0.6% to S$919m, vis-à-vis topline growth of 1% y-o-y to S$1.05bn. Thus, EBIT grew by 4.1% y-o-y S$129m, from S$123.9m a year ago. 
  • As a result of lower interest expenses with loans repaid by its UK operations, net profit grew slightly faster. 9M15 net profit forms 77% of our forecasts (9M14: 77.5%). 
  • Management revealed that its taxi bookings are still on a growth trend, and its hired out rate remains high despite competition from third party booking apps. 

Stable growth projected, but valuations are at +1.5 std deviation above historical average. 

  • We like CD for its stable growth and geographical diversification. However, we believe this has been priced in at this juncture with the counter trading at about +1.5 std deviation above its 5-year historical average. 
  • In our view, this could already imply that the potential upside from the bus reforms could have been priced in, partially, if not mostly. 
  • We would prefer to accumulate at a lower price, at c.10-15% lower from our TP. 


  • Our target price is S$3.00, derived from the average valuations using discounted cash flow (DCF) and price-earnings ratio (PER) methods. 
  • Our TP implies a PE of 18.8x on forward FY16F earnings, which is +1 std deviation above its historical average. This should have priced in the asset-light model for the bus operations in Singapore. 

Key Risks to Our View: 

  • Regulatory risks. Lower-than-expected fare increase, and or changes in regulations to the operations, may impact our forecasts.

Andy Sim DBS Vickers | http://www.dbsvickers.com/ 2015-11-16
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 3.00 Same 3.00