COMFORTDELGRO CORPORATION LTD (SGX:C52)
ComfortDelGro - Ridership Slow To Recover
- ComfortDelGro’s normalised operating loss of S$101m in 2Q20 was wider than expected. No interim dividend was declared due to 1H20 losses (FY19: 4.5 Scts).
- Ridership recovery in Singapore remains slow. Without government reliefs, public transport and taxi segments could remain loss-making in 3Q20.
- Further relaxation of COVID-19 restrictions is needed to support earnings recovery and re-rating of share price.
- Maintain HOLD with lower Target Price of S$1.40.
ComfortDelGro’s 2Q20: Impacted by lockdowns
- ComfortDelGro (SGX:C52) reported a 2Q net loss of S$42m, bringing 1H20 into a net loss position of S$6m. Stripping out government reliefs (+S$82m) and impairment losses (-S$31m), ComfortDelGro’s normalised operating loss of S$101m in 2Q20 was wider than our expectations.
- Key drags during the quarter were taxi (S$57m operating loss) and SBS Transit (SGX:S61) (S$44m operating loss), given the full taxi rental waiver and low rail ridership during the 2-month circuit breaker in Singapore.
- Due to 1H20 losses, ComfortDelGro did not declare an interim dividend (FY19: 4.5 Scts).
Longer pain as we expect ridership recovery to be gradual
- Ridership normalisation in Singapore since the lifting of the COVID-19 lockdown has been slower than expected, as working from home (WFH) remains the default option in the current phase of reopening. Rail ridership in Jul remained low at c.50% of pre-COVID-19 levels (June: 36%).
- To support taxi drivers’ earnings, ComfortDelGro announced 30% daily taxi rental rebate until 15 Sep, a slight step down from the 40% rental rebate given from 16 Jul to 15 Aug. Management guided that the rebates will continue to taper in the coming months, but this initiative could be extended till year-end, versus previously guided Sep.
- Based on current trajectory, we estimate both public transport and taxi segments to remain in the red in 3Q20 (without factoring in government reliefs). We lower our FY20-22F core EPS (excludes impairment, which is non-cash) by 2.8-5.2% to factor in higher taxi rental rebates and lower ridership assumptions for public transportation, partially offset by higher government reliefs.
Maintain HOLD with a lower Target Price of S$1.40
- To see a faster ridership recovery in Singapore, we believe either one of the following has to happen:
- relaxation of work-from-home arrangements, or
- earlier transition into phase 3 of reopening.
- Reiterate HOLD.
- See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.
- While the worst is likely over with ComfortDelGro’s key operating regions emerging from lockdowns, we expect a bumpy road to recovery, with governments having to maintain a cautious balancing act between lifting restrictions to allow the economy to recover and preventing another wave of COVID-19.
- With the EPS cuts, our Target Price is lowered to S$1.40, pegged to 13.3x FY21F P/E, still based on 1 s.d. below ComfortDelGro’s historical mean.
- Upside risks include potential rail financing policy reform or earnings-accretive M&As, while downside risks include steeper taxi fleet decline 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
2020-08-16
SGX Stock
Analyst Report
1.4
DOWN
1.460
