COMFORTDELGRO CORPORATION LTD (SGX:C52)
ComfortDelGro - Speed Bumps
- ComfortDelGro's 1Q20 net profit fell 49% y-o-y, below expectations at 20.7% of our FY20F, as the two largest segments (public transport and taxi) were hurt by Covid-19.
- Taxi segment could go into the red with rental relief measures to keep drivers. Public transport segment is also impacted, but JSS will be a significant help.
- Maintain HOLD with a lower Target Price of S$1.50.
Weak 1Q20 results due to Covid-19
- ComfortDelGro (SGX:C52) posted a 1Q20 net profit of
S$70mS$35m (-26.2% q-o-q, -48.9% y-o-y), below expectations at 20.7% of our FY20F. Public transport segment recorded a 39% y-o-y EBIT decline due to lower ridership and impact from bus fuel indexation; while taxi segment saw an EBIT drop by 92% y-o-y due to smaller taxi fleet and rental rebates rolled out in SG and China. - We understand that ComfortDelGro did not recognise any Job Support Scheme (JSS) subsidy in 1Q20.
Taxi segment to remain the key drag
- We expect the taxi segment to report an operating loss of S$32m in FY20F (FY19: segment EBIT of S$104m), after taking into account the 2-month full rental waiver during SG’s circuit breaker period, and ComfortDelGro’s commitment to extend its additional daily rental relief of up to S$26.50 to cabbies until Sep.
- Even after the circuit breaker measure is lifted in Singapore, we believe cabbies’ earnings will take at least 3-6 months to normalise given the weak tourism sector and continued safe distancing measures by the government. We do not rule out a further extension of the rental rebates, as it is crucial for ComfortDelGro to retain its taxi fleet through this Covid-19 crisis.
Public transport segment also impacted, but JSS will help
- Public transport services continued to operate in ComfortDelGro’s major markets throughout the lock-downs, but at a reduced frequency. Revenue recognition under bus contracting model (BCM) will be impacted slightly as service fees collectible is a function of bus mileage operated.
- Meanwhile rail revenue could see a bigger hit as ComfortDelGro is exposed to ridership risk.
- ComfortDelGro is actively managing its operating costs to cushion the fall in revenues; and we estimate c.S$90m JSS subsidies to be a significant help. Overall, we expect ComfortDelGro to record a 45.6% core net profit decline in FY20F.
Maintain HOLD with a lower Target Price of S$1.50
- We lower our FY20-22F EPS by 3.4-8.6% to factor in higher taxi rental rebates and lower service fees and ridership for public transportation. Our target price is lowered to S$1.50, still based on 13.1x FY21F P/E (1s.d. below its historical mean).
- We reiterate our HOLD call, as we think recovery in ridership will be gradual with continued safe distancing measures in place.
- See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.
- Upside risks include possible earnings-accretive M&As, while downside risks include higher-than-expected taxi idle rates and slower ridership recovery.
ONG Khang Chuen CFA
CGS-CIMB Research
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Cezzane SEE
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-05-25
SGX Stock
Analyst Report
1.50
DOWN
1.550
