ComfortDelGro - Maybank Kim Eng 2016-02-15: Weathering the storm

ComfortDelGro - Maybank Kim Eng 2016-02-15: Weathering the storm COMFORTDELGRO CORPORATION LTD C52.SI 

ComfortDelGro (CD SP) - Weathering the storm 

Upgrade to HOLD; Resilient taxi earnings 

  • We upgrade ComfortDelGro to HOLD from SELL as taxi earnings appear resilient, despite threats from new entrants. 
  • Furthermore, the valuation is off the peak following share price weakness during the past year. 
  • We raise our FY16/17E EPS by 5.2%/6.9% mainly to reflect upwards revisions to our taxi forecasts. 
  • Our TP is lifted 3.7% to SGD2.80 based on an unchanged 17x FY16E, 1SD above its long-term average. 
  • We expect robust EPS growth to provide valuation support. 

4Q15 in-line; Start-up losses at rail not a concern 

  • 4Q15 net income of SGD68.2m (+7.1% YoY, -20.0% QoQ) was marginally above with full year 2.8% above estimates. 
  • A small loss of SGD2.2m for the rail segment was due to start-up losses for DTL Stage 2, which was the only weak spot in the results. 
  • Full year DPS improved to 9 SGD cts. 

Taxi earnings resilient 

  • Contrary to our expectations for some sign of weakness, the taxi business delivered solid EBIT of SGD163.9m (+8.6% YoY) for FY15. 
  • It appears that new entrants have yet to affect profitability of traditional operators. 
  • We also attribute this resilience to: 
    1.  support to driver’s earnings from rising income in Singapore (2015 median income up 6.5%YoY); 
    2.  general taxi shortfall in the market; and 3) rebounding tourism traffic. 
  • Management guides that only 0.8% of its fleet is currently idle. 

Stay cautious on Singapore bus and rail transition 

  • We stay cautious on the Singapore bus and rail business transition. 
  • While the bus operators will transit to a new operating model from Sep 2016, details of the asset transfer remain under negotiation, and one should not be too certain of a windfall from any asset sale. 
  • While the DTL could remain loss making as it prepares for the opening of Stage 3 in 2017, we expect the overall rail segment to stay profitable due to support from the mature NEL. 
  • It is also important to note that the 75%-stake in SBS Transit (Not Rated) accounts for just 7.6% CDG’s stock value.

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-02-15
Maybank Kim Eng SGX Stock Analyst Report HOLD Upgrade SELL 2.80 Up 2.70