ComfortDelGro - CGS-CIMB Research 2018-10-30: Riding On Fare Hike

COMFORTDELGRO CORPORATION LTD (SGX:C52) | SGinvestors.io COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - Riding On Fare Hike

  • 4.3% hike on bus and train fares will be implemented from 29 Dec.
  • Fare hike could help to turn around ComfortDelgro’s rail operations from losses sooner than expected.
  • Maintain ADD and DCF-based Target Price of S$2.75 (WACC: 7.4%, LTG: 2%).



Public transport fares set to increase 4.3% by year-end

  • The Public Transport Council (PTC), having concluded its 2018 Fare Review Exercise (FRE), today announced it will implement the maximum allowable adjustment quantum of 4.3% for bus and train fares.
  • The fare hike will take effect from 29 Dec 2018.
  • Fare increases will be significant for adults commuting using travel cards (up 6 Scts per journey) or single-trip ticket for trains (up 10 Scts).
  • As part of the 2018 Fare Review Exercise, ComfortDelgro’s subsidiary, SBS Transit (SGX:S61), will be required to contribute 5% of its expected increase in fare revenue (c.S$0.55m) to the Public Transport Fund, which will be tapped by the government to issue vouchers for lower income families to cope with the fare adjustment.



Rail could turn

  • According to the Public, the fare hikes should add S$109m to ComfortDelgro’s rail.
  • We think this could turn its rail around from sooner than expected turnaround possibly 2H19F
  • We estimate the fare hikes could add 0.24 Scts to our earlier forecast hike.


Maintain ADD; Target Price S$2.75

  • We maintain our ADD call and leave our forecasts unchanged for now.
  • Near-term catalyst could come from better-than-expected 3Q results, which are slated to be released on 9 Nov after trading hours.
  • A possible revival in Private-Hire Car competition following the entry of a new player into the market could pose a key downside risk that could impact the recovery of ComfortDelgro’s taxi earnings.







Colin TAN CGS-CIMB Research | Cezzane SEE CGS-CIMB Research | https://research.itradecimb.com/ 2018-10-30
SGX Stock Analyst Report ADD MAINTAIN ADD 2.750 SAME 2.750



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