ComfortDelGro - OCBC Investment 2019-05-15: A Steady Ride


ComfortDelGro - A Steady Ride

  • 6.2% y-o-y rise in ComfortDelGro's 1Q19 net profit.
  • Supported by public transport services.
  • Lower revenue from taxi segment.

1Q19 results within expectations; supported by public transport services

  • COMFORTDELGRO CORPORATION LTD (SGX:C52) delivered a 7.8% y-o-y rise in revenue to S$947.3m and a 6.2% increase in net profit to S$70.4m in 1Q19, such that the latter accounted for 22% of ours and the street’s full year expectations.
  • The public transport business registered a S$71.4m or 11.6% y-o-y rise in revenue to S$684.9m in the quarter, of which new acquisitions accounted for S$50.3m of the increase.
  • In Singapore, SBS TRANSIT LTD (SGX:S61)’s bus revenue was higher following the commencement of the Seletar and Bukit Merah Bus Packages last year, while rail revenue was supported by higher ridership on the DTL, NEL and LRT and higher average fare following the 4.3% fare adjustment (effective end 2018).

Taxi business affected by smaller fleet

  • The taxi business saw a 3.8% y-o-y drop in revenue to S$171.9m in 1Q19, due to a smaller fleet in Singapore and Australia, as well as lower revenue in China from fewer double shift taxis in Beijing and a smaller operating fleet at Nanjing, compounded by an unfavourable currency translation from the weaker RMB. This was offset by an increase in revenue from Shenyang, as well as higher revenue in the UK from the acquisition of Dial-a-cab.

Outlook by segments

  • Looking ahead, the group expects revenue from the public transport services segment to increase, supported by Singapore and Australia; UK to remain the same. Taxi revenue is expected to decrease, along with car rental & leasing.
  • Revenue for the other segments should be quite stable. ComfortDelGro is also participating in bus tenders in Australia, such as in Adelaide and Perth, and the results for South Australia should be around September while Perth should be earlier.

Can still acquire but need the bench strength as well

  • As of end Mar 2019, the group was in a net cash position of S$26.0m. We expect acquisitions to continue, though management commented that the ability to find the right people to run the acquired businesses is also a factor during considerations.
  • We fine tune our estimates and our Fair Value rises from S$2.63 to S$2.69.
  • Maintain HOLD.

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2019-05-15
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.69 UP 2.630