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

COMFORTDELGRO CORPORATION LTD (SGX:C52)

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

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 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.

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.

See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.
Moving into FY21E, we see room for higher dividend payout ratio as ComfortDelGro’s bottom line recovers and net cash position (S$190.5m or S$0.09/share) continues to strengthen. Management is also open to exploring higher payout ratio if the COVID-19 situation and earnings improve. We currently forecast a 60% payout ratio for FY21E vs a 5-year average of 73%. This implies a FY21E dividend of S$0.042 per share and 2.7% yield.
COVID-19 has made the inflection point for recovery difficult to predict. That said, there is significant value as we think the worst is over and ComfortDelGro offers domestic transport recovery story, while trading at a 42% P/B discount to its historical mean.

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