COMFORTDELGRO CORPORATION LTD
C52.SI
ComfortDelGro (CD SP) - Results In Line; Uber Tie-up May Be Finalised Soon
Results on track; upbeat on potential Uber tie-up
- ComfortDelGro 9M17 core earnings were in line, at 77% of ours and consensus FY17E.
- Earnings fell 8% YoY due to a 21% decline in taxi EBIT, but the bus and rail EBIT grew 3%. Taxi weakness was in line, but the rail turnaround could be delayed slightly due to upcoming fare cut; we trimmed FY18-19E EPS by 1%.
- Uber tie-up could be finalised before end-Nov 2017, benefits highlighted are:
- offset taxi weakness;
- partner with deeper pockets; and
- access to better technology.
- BUY with unchanged DCF-based TP of SGD2.40, (16x FY18E EPS, equal to the LT mean).
- FY17-19E dividend yields of > 5% are the highest since 2005 and are sustainable given ex-taxi FCF yield of 7.8% for FY18E.
Taxi weakness continued; few initiatives are in place
- Taxi EBIT decline of 21% YoY in 3Q17 continued to deepen, from -17% and -13% in the past two quarters due to increased competition from the private-hire vehicles. However, drivers’ attrition due to aggressive promotions by Grab in 3Q17 was much lower than the 2,000-3,000 reported by the media. The actual number was only in the low-hundreds.
- Although taxi bookings continued to decline by around 20% YoY, the number improved QoQ due to the flat fare scheme introduced in 2Q17. A flexible rental scheme with lower fixed rental has also helped.
Rail segment healthy but minor derail from fare cuts
- The new Downtown Line 3 has shown healthy progress since its opening in Oct 2017. Latest average daily ridership has reached 430k (vs 258k in 3Q17) and is growing healthily.
- Although this is not too far from the 500k breakeven rate, the breakeven timeline could be delayed to early 2019, due to the upcoming fare cut of up to 5.7%. For this, we trimmed FY18E rail EBIT to -SGD5m from +SGD5m and FY19E to SGD23m from SGD27m.
Uber tie-up to be finalised soon & should be positive
- According to management, potential benefits from Uber tie-up include:
- exposure to the private hire vehicle segment, part of the supply chain that has been taking away its taxi market share;
- tie-up with a player with deeper pockets who could share complementary strategies; and
- tap Uber’s technology. Also, Uber enhanced its loyalty and marketing programme recently.
Swing Factors
Upside
- Better-than-expected bus profitability.
- Successful bids for new rail lines in Singapore.
- Value-enhancing acquisitions of overseas business.
Downside
- Decline in taxi utilisation or rental rates.
- Overpaying for acquisitions.
- Higher labour and energy costs.
John Cheong CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2017-11-13
Maybank Kim Eng
SGX Stock
Analyst Report
2.400
Same
2.400
