ComfortDelGro - Maybank Kim Eng 2021-02-16: FY20 Profit In Line; Early Signs Of Recovery; BUY


ComfortDelGro - FY20 Profit In Line; Early Signs Of Recovery; BUY

FY20 profit in line; BUY - recovery play

  • ComfortDelGro (SGX:C52)'s FY20 headline earnings were largely in line with street estimates. But if excluding impairment of S$48.3m, FY20 core earnings would have been above MKE/street estimates by 34-48%. 
  • Maintain BUY and DCF-based target price (WACC: 8.2%, long-term growth: 1%) of S$1.88 as ComfortDelGro offers exposure to domestic transport recovery.
  • We continue to expect q-o-q earnings recovery as rental waivers to taxi drivers decline.
  • Key risk includes worsening of COVID-19 situation in key operating countries.

ComfortDelGro's FY20 dividend beat our forecast

  • ComfortDelGro's FY20 revenue of S$3.2b (-17.2% y-o-y) was in line with our forecast. Lower revenue was mainly due to decline in public transport segment (-11% y-o-y) as a result of border closures and lockdowns, as well as rental waivers for taxi drivers (revenue -39% y-o-y) in Singapore and China. See ComfortDelGro's announcements. The bottom line fell 76.7% y-o-y to S$61.8m due to negative operating leverage and impairment of vehicles and goodwill ( ~ S$48.3m) in 2Q and 3Q. However, no impairment was made in 4Q20.
  • ComfortDelGro declared a first and final dividend of S$0.0143 per share, representing a payout ratio of 50% and 0.9% yield. These are above our expectations of S$0.009 per share.

Sequential recovery continues

  • We noted ComfortDelGro's operational EBIT showed sequential improvement in 4Q20 (+30% q-o-q). This was primarily driven by operating leverage from the taxi division. The division turned around as rental waivers to taxi drivers tapered off.
  • With taxi ridership kept at ~ 80% of pre-COVID levels since 3Q, we do not expect significant rental waivers to taxi drivers again going forward. Meanwhile, rail ridership recovered to 65% of pre-COVID levels (vs 3Q20: 55%).
  • Overall, there are no changes to our FY21 forecasts.

Dividend payout ratio has room to grow in FY21E

Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-02-16
SGX Stock Analyst Report BUY MAINTAIN BUY 1.880 SAME 1.880