COMFORTDELGRO CORPORATION LTD (SGX:C52)
ComfortDelGro - Steering Into A Green Economy
Rising exposure to public transport
- As a global land transport operator, ComfortDelGro (SGX:C52) is exposed to multiple ESG risks, particularly environmental risks.
- ComfortDelGro is focused on tackling emissions issues through a fleet replacement programme. It is also exposed to social risks through welfare initiatives for its taxi drivers, especially during the current COVID-19 environment. Nevertheless, ESG imperatives will continue to structurally favour public transport over private vehicle ownership, we believe.
- ComfortDelGro offers exposure to this theme and is trading at 1.2x P/B, or 2 s.d away from mean.
- Maintain BUY on ComfortDelGro with DCF-based Target Price of SGD1.76 (WACC: 8.2%, LTG: 1%).
Embarking on green journey
- ComfortDelGro is most exposed to environmental risks. Diesel/ petrol vehicles are increasingly becoming a symbol of “dirty transport”. As such, it is tackling emissions issues by phasing out diesel vehicles and replacing it with hybrid/ electric vehicles.
- That said, public transport plays a significant role in reducing use of private vehicles, which in turn helps cities cut down air pollution and carbon emission efficiently. As such, we believe longer-term policy would be supportive of public transport.
Social risk exposure
- ComfortDelGro has a history of supporting its taxi drivers through crisis, as seen from SARS and COVID-19. This year, ComfortDelGro is offering SGD116m (est SGD10.7k/ taxi) rental rebates to alleviate financial pressure on Singapore taxi drivers amid a sharp drop in ridership during the pandemic.
- Back in 2003 during SARS, ComfortDelGro also cut daily rental rates, lowered diesel costs amid high oil prices and passed on government grants to its drivers. This should help strengthen its relationship with drivers post-crisis and stabilise its taxi attrition rates.
Sustainable finance an opportunity
- Green loans are a growing opportunity for ComfortDelGro to improve its funding mix given its strategy of reducing emissions. Its Australian subsidiary secured an A$25m green loan from OCBC Bank in 2018 to finance its hybrid bus fleet in Victoria.
- Moving forward, we should see more green loans for its clean fleet replacement, as banks are also looking to increase its green investments.
- See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.
Kareen Chan
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2020-09-23
SGX Stock
Analyst Report
1.760
SAME
1.760
