COMFORTDELGRO CORPORATION LTD (SGX:C52)
ComfortDelGro - Short-term Impact By COVID-19
- Core profit in line.
- Lower 2H19 div after a higher interim 1H19.
- COVID-19 impact significant albeit transitory.
Core profit in line; taxi business impairment
- ComfortDelGro (SGX:C52) saw a 2.6% rise in revenue but net profit fell 12.6% to S$265.1m in FY19, impacted by a one-off impairment of S$27.1m in the taxi business. Stripping this out, 4Q19 adjusted net profit was around S$76m (-2.9% y-o-y) while FY19 adjusted net profit fell 1.9% y-o-y to S$292m, which was in line with expectations.
- The impairment for the taxi impairment is understood to be for the Singapore and China businesses, taking into account the lower fleet size and the need to enhance rebate schemes to retain drivers.
Impact from COVID-19
- Since the start of the COVID-19 outbreak, there has been a drop in demand for taxis. A S$77m package to tide cabbies and private-hire drivers has been introduced starting 14 Feb, with the government contributing $45m and taxi and private-hire companies paying for the rest. We estimate that ComfortDelGro has committed about S$18m in taxi rental rebates from Feb-May 2020.
- For the Singapore public bus operations, ComfortDelGro is not exposed to fare revenue, as the group operates under the bus contracting model. As for rail, ridership is likely to be impacted by COVID-19, lengthening the time required to attain breakeven for the DTL. The railway operational framework also offers some level of protection against revenue risks arising from uncertainties in fares and ridership.
Lower dividend in 2H19
- ComfortDelGro has declared a final dividend of 5.29 S cents, which is 14% lower than the 6.15 S cents in 2H18. Recall that 1H19 interim dividend of 4.5 S cents was 3.4% higher than the 4.35 S cents that was declared in 1H18. This brings 2019 full year dividend to 9.79 S cents (payout ratio 80%), vs. 10.5 S cents in 2018.
- ComfortDelGro's net gearing remained low at 1.3% as at end FY19, and ComfortDelGro is in a position to undertake more acquisitions.
- We expect COVID-19 to have a significant impact to the taxi and rail business, though this should prove transitory. We fine-tune our estimates and our fair value estimate is revised lower to S$2.70.
- See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-02-17
SGX Stock
Analyst Report
2.70
DOWN
2.910
