ComfortDelGro - OCBC Investment 2018-11-12: Monitoring The Taxi Space

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COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - Monitoring The Taxi Space

• Results in line.
• DTL to breakeven in 2H19.
• Monitoring Go-Jek.

3Q18 results within expectations

• ComfortDelGro (CDG) registered an 8.5% y-o-y rise in revenue to S$967.9m and a 2.0% fall in net profit to S$78.5m in 3Q18, bringing 9M18 net profit to S$219.8m or 72% of our full year forecast.
• The S$76.2m increase in revenue from a year ago was mainly from the public transport service business (+S$91.4m), offset by the taxi business (-S$16.6m) and auto engineering service business (-S$2.3m).
• New acquisitions contributed to 45% of the increase.

Downtown Line likely to breakeven in 2H19; Northeast Line to remain profitable

• With the recently announced fare increase which will take effect end of this year, management estimates that it will still need at least 600k+ ridership to breakeven for the Downtown Line (DTL). Current ridership is about 480k+ on average, and exceeds 500k on good days. It is estimated that breakeven may be attained around 2H19.
• On a sequential basis q-o-q, the loss is narrowing. For the Northeast Line (NEL), profitability has improved with transition to the new rail financing framework, but ComfortDelGro also has to contribute labour and some expenditure for mid-life maintenance of rails and tracks. Some costs will be incurred but NEL is expected to remain profitable.

Net addition of 100 taxis by year end; monitoring Go-Jek

• During the Uber/Grab era when competition was most intense, the peak idle rate of ComfortDelGro’s taxi fleet was around 6%, and holding cost was high. Older taxis were sold/scrapped and the fleet size came down to 13k+. The fleet size currently is now about 12.3-12.4k, and the idle rate at 2+% is manageable.
• In Singapore, ComfortDelGro will be taking delivery of up to 700 new hybrid taxis by the end of this year (new addition to fleet is about 100 as the rest are replacement taxis).
• Currently there are little indications that Go-Jek is buying many new vehicles off the market, but the actions of Go-Jek remain a wild card.
• Meanwhile, with the increased market volatility in the market, we have also increased risk premia assumptions and cost of equity, such that our Fair Value estimate slips to S$2.29.
• Maintain HOLD.

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2018-11-12

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.29 DOWN 2.500