ComfortDelGro - OCBC Investment 2017-05-15: 1Q17 Largely Within Expectations

ComfortDelGro - OCBC Investment 2017-05-15: 1Q17 Largely Within Expectations COMFORTDELGRO CORPORATION LTD C52.SI

ComfortDelGro - 1Q17 Largely Within Expectations

  • Received special dividends in 1Q17.
  • Taxi business facing headwinds.
  • Balance sheet remains strong.

Core 1Q17 formed 22.1% of FY17 forecast 

  • ComfortDelGro’s (CDG) 1Q17 results came in largely within expectations despite a 2.4% YoY decline in revenue to S$972.0m, mainly eroded by weaker GBP against SGD. 
  • Underlying revenue was actually flat, driven by public transport services (bus and rail) but offset by taxi and automotive engineering businesses due to a fall in Singapore taxi fleet size and the corresponding lower volume of diesel sold to taxi drivers. 
  • 1Q17 operating expenses fell 1.7% YoY to S$871.5m, mainly due to positive FX effect from weaker GBP against SGD. If not for the FX impact, operating costs would have increased 1.0%, mainly driven by higher depreciation and higher staff costs. 
  • CDG also received ~S$11.1m in special dividends given its 9.6% stake in Cabcharge Australia. Consequently, excluding this one-off special dividend, 1Q17 core PATMI came in flat at S$72.7m, and formed 22.1% of our FY17 forecast. 
  • Note that first quarter has historically been CDG’s weakest quarter.

Taxi facing headwinds while rail prepares for growth 

  • Looking to FY17, CDG expects revenue for taxi business to be lower while public transport services revenue to be higher. 
  • We expect private hire car services to continue to impact taxi business, resulting in shrinking taxi fleet size, translating to lower taxi rental revenue. CDG’s taxi fleet idle rate has also increased from an average of 1.4% in FY16 to 3.0%-3.5% in 1Q17, despite implementing revenue sharing schemes to help lower fixed rental costs for hirers to take it up. That said, CDG’s fleet idle rate remains well below industry average in such a challenging environment. 
  • On a positive note, we expect rail to be the main revenue growth driver ahead with the opening of DTL3 in 2H17, which serves the most populated areas compared to the first two phases. As it takes time to ramp up ridership, we forecast for DTL breakeven from FY19.

Net cash position of S$247.9m 

  • On aforementioned reasons, we cut our FY17/18F PATMI by 3%/6% and lower our FV from S$2.95 to S$2.88. Maintain BUY.

Eugene Chua OCBC Investment | http://www.ocbcresearch.com/ 2017-05-15
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.88 Down 2.950