ComfortDelGro - Maybank Kim Eng 2020-05-26: Beneficiary Of Post-COVID-19


ComfortDelGro - Beneficiary Of Post-COVID-19

Reduced margin assumptions. Maintain BUY

  • We reduce our ComfortDelGro (SGX:C52)'s FY20E EBIT margin forecast by 50bps to reflect slower pace of decrease in operating costs. Our DCF-based (WACC 8.2%, LTG 1%) Target Price is consequently reduced by 0.5% to SGD 1.98.
  • Gradual lifting of social-distancing measures remains a key catalyst behind our BUY.
  • Worse-than-expected taxi segment and/or a structural change in commuting habits after outbreak is the downside risk to outlook.

1Q20 slight miss on weaker revenue

  • ComfortDelGro’s 1Q20 PATMI missed MKE & street expectations, coming in at 21%/17% of MKE/ consensus FY20E. While 1Q20 revenue is in line with our estimates, EBIT came in below our expectation due to higher-than-expected operating cost in public transport segment. Therefore, we maintain our revenue forecast but reduce FY20E EBIT margin forecast by 50bps to reflect slower pace of decline in operating cost in taxi and public transport business.

Bus contracting model proving to be defensive

  • Fall in public transport services revenue were mainly affected by decrease in rail ridership in Singapore, bad weather and COVID-19 impact in the UK resulting in fewer routes, as well as weaker AUD.
  • Operating profit margin was narrowed by high fixed cost in rail operations. This segment will be further hit by the effects of circuit breaker measures implemented in 2Q20 in countries where ComfortDelGro operates in (Singapore, Australia, UK). However, management has guided its BCM business across Singapore and Australia remains fairly stable.
  • ComfortDelGro is looking to bid for 3 new route tenders in Sydney.

Taxi under pressure but fleet size remains healthy

  • Taxi segment was hit by rental relief schemes in Singapore from Feb onwards and full-rental waivers for China taxis during COVID-19 lockdowns. The segment will see further impact from 2-month full-rental waiver for Singapore taxi drivers in 2Q20. Its current COVID-19 rental relief scheme (till Sep 2020) will be further reviewed. Extension of scheme till end Dec presents a 2% reduction to our Target Price. Currently, its entire SGD116m rental waivers has been baked into our forecast.
  • That said, after China’s lockdown, its taxi business is on its path of recovery and we should see similar recovery in Singapore taxi business as social distancing policy eases. Currently, Singapore taxi fleet size remains healthy at ~10,000.
  • See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.

Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-05-26
SGX Stock Analyst Report BUY MAINTAIN BUY 1.98 DOWN 1.990