COMFORTDELGRO CORPORATION LTD (SGX:C52)
ComfortDelGro - Public Transport Ridership Is Improving; Stay BUY
- ComfortDelGro (SGX:C52)’s Singapore rail business should benefit from gradual improvements in public transport ridership as the country enters Phase 3 of re-opening the economy. We maintain that continued government support from extensions to the Jobs Support Scheme (JSS) and Point-to-Point Support Package to 2021 will provide cost support for its Singapore operations.
- ComfortDelGro’s forward P/E and P/BV look compelling given our expectations of strong profit growth and sharp increase in 2021F ROE. Stay BUY and SGD1.70 Target Price, 16% upside and c.5% FY21F yield.
SBS Transit (SGX:S61) is seeing improvement in rail ridership.
- In 2019, public transport business accounted for c.55% of ComfortDelGro’s operating profit. While it does not disclose numbers, we estimate a large portion of that profit accrues from its Singapore operations, especially bus operations as the rail business has been losing money.
- With the implementation of circuit breaker measures due to the pandemic, losses for rail business are likely to have seen a sharp rise amid lower ridership and higher costs owing to efforts to ensure safe distancing. However, with the gradual removal of Circuit Breaker measures, rail ridership has improved. The average daily rail ridership has increased 3.7x to 735,000 in Sep 2020 vs 196,000 in May 2020. This, however, is still 40% lower than the same month last year.
- As Singapore enters Phase 3 of re-opening the economy, ridership should continue to witness m-o-m improvement over the next few quarters. This should help alleviate revenue stress faced by its rail business. The extension to the JSS to early 2021 should provide the much needed cost support for the public transport business in Singapore.
Apple and Google data suggests improvement in public transport mobility.
- Based on mobility trend data published by Apple, which captures the volume of directions requests made by Apple users, the movements for transit have improved significantly after declining by c.88% in Apr 2020 and are now only 12% below pre-COVID levels.
- Similar data from Google, which captures the change in visits to places from a pre-COVID baseline, assessed that visits to transit stations are now only down by 30% vs a peak decline of 75% in Apr 2020.
Cheap when put in context of earnings and ROE recovery.
- Unless there is a re-emergence of COVID-19 in Singapore, the expected gradual improvement in public transport ridership during 2021 and stabilisation of ComfortDelGro’s taxi business should support more than 150% profit growth in 2021F.
- Our DCF-derived SGD1.70 Target Price for ComfortDelGro implies 17.7x 2021F P/E, which is slightly higher than the stock’s 10-year average of 15.7x. On a P/BV basis, ComfortDelGro is trading at a historical low of 1.2x, which we believe fails to capture the expected sharp improvement in ROE in 2021F.
- See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.
Shekhar Jaiswal
RHB Securities Research
|
https://www.rhbinvest.com.sg/
2020-10-19
SGX Stock
Analyst Report
1.700
SAME
1.700
