ComfortDelGro - CGS-CIMB Research 2020-02-15: Quiet Streets


ComfortDelGro - Quiet Streets

  • ComfortDelGro (SGX:C52)'s FY19 normalised NP fell 1.9% y-o-y, roughly in line at 98%/99% of our/Bloomberg consensus FY19F; but final dividend disappointed (-14% y-o-y).
  • We expect further earnings decline in FY20F as taxi operations are likely to be hit by the coronavirus outbreak, with ComfortDelGro giving out rental rebates.
  • Reiterate HOLD with a lower Target Price of S$2.08.

4Q19 net profit roughly in line; but dividends disappoint

  • Stripping out a one-off impairment provision of S$27m on ComfortDelGro’s taxi business, 4Q19 normalised net profit came in at S$76m (+8.7% q-o-q, -2.9% y-o-y). CD’s FY19 normalised net profit fell 1.9% y-o-y to S$292m, roughly in line with expectations at 98% of our and 99% of Bloomberg consensus full-year forecasts.
  • Drags remain
    1. weaker public transport services margins due to higher repair and maintenance expenses and licence charges for the Downtown Line (DTL), and
    2. continued decline in taxi revenue due to a smaller fleet size.
  • However, we believe the key disappointment of the results lies in a lower final dividend of 5.29 Scts (FY18: 6.15 Scts).

Taxi operations likely to be hit by coronavirus in 1H20F

  • Singapore streets are visibly quieter outside of work hours, especially after the government raised the Disease Outbreak Response System Condition (DORSCON) level to orange last week. In response, Land Transport Authority (LTA) announced a support package, where taxi drivers in Singapore will receive up to S$20 per vehicle per day for three months, contributed equally by the government and operators.
  • We also expect ComfortDelGro to give out rental discounts for its taxi operations in China, and currently model in one-off Rmb3,000 rental rebate per taxi. We forecast taxi normalised EBIT to decline by 12% for FY20F (estimated 27% of group EBIT).

Public transport segment also impacted, albeit to a lesser extent

  • The impact of lower ridership on the public transport segment will mainly be on ComfortDelGro’s rail business, in our view, but the railway operational framework offers some level of protection against revenue risks arising from uncertainties in ridership and fares.
  • Meanwhile, ComfortDelGro is not exposed to fare revenue for its public buses in Singapore, which operate under the bus contracting model.
  • Overall, we expect ComfortDelGro to record 3% normalised EPS decline in FY20F.

Reiterate Hold with a lower DCF-based Target Price of S$2.08

ONG Khang Chuen CFA CGS-CIMB Research | Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-15
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.08 DOWN 2.090