ComfortDelGro - Maybank Kim Eng 2021-01-11: Life In 2021

COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - Life In 2021

We believe recovery in taxi and public transport ridership creates a favourable condition for ComfortDelGro (SGX:C52) in FY21. We maintain BUY on ComfortDelGro with higher DCF-based target price (WACC: 8.2%, LTG: 1%).
We increased ComfortDelGro's FY21 earnings forecast by 23% to account for operating leverage as public transport and taxis recover. ComfortDelGro offers exposure to domestic transport recovery, which should see a faster pace of turnaround compared to aviation.

Downside risks include further impairment of UK businesses due to the worsening COVID-19 situation.

We expect a sequential recovery in rail ridership in FY21 due to further easing of social-distancing and work-from-home measures, and as vaccines should be available. Meanwhile, we expect Bus Contracting Model (BCM) to remain stable as these are fixed contracts and COVID-19 is under control in Singapore and Australia.
A sharp drop in fuel prices in Jan- Apr 2020 has resulted lower BCM contract fees in 1H20. With fuel prices recovering since 2Q20, we expect BCM to contribute a more stable portion in FY21E. Thus, we have factored in 4.5% y-o-y revenue growth in public transport for FY21E, as we assume rail ridership will return to 75% of pre-COVID levels.

Ridership saw the fastest pace of rebound in 3Q20 as riders prefer taxis/private hire cars (PHCs) to reduce social interaction. The momentum should continue to gather steam, and alternative data (the number of taxis at taxi stands during peak hours) suggests that taxi idling rate has decreased ~90% in the past 3 months.
Anecdotally, our conversations with taxis/Grab drivers also suggest that situation has improved vastly. Drivers have started choosing their calls and routes to maximise income. Meanwhile, the implementation of stricter point-to-point regulation for PHC firms, and potential merger of Grab and Gojek indicate less competition for ComfortDelGro.
Overall, we do not expect ComfortDelGro to provide substantial rental rebates to taxi drivers and forecast 30% y-o-y revenue growth this year.

See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.
We opine ComfortDelGro's share price recovery could be in stages, catalysed by:
1. easing of work-from-home measures;
2. COVID-19 in the UK under control; and
3. return of tourists when air travel resumes.
ComfortDelGro is trading at 24.1x FY21E P/E with 2.5% FY21E yield. The current price implies 1.4x P/B, which is 2 SD below historical mean. COVID-19 has made inflection points hard to predict but ComfortDelGro offers value as the worst is over and long-term fundamentals are intact.

Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-01-11

SGX Stock Analyst Report BUY MAINTAIN BUY 1.88 UP 1.760