ComfortDelGro - Maybank Kim Eng 2021-05-13: Recovery Mode


ComfortDelGro - Recovery Mode

1Q21 PATMI ahead of estimates; Maintain BUY

  • ComfortDelGro (SGX:C52)'s 1Q21 PATMI of S$56m (+56% y-o-y, +22% q-o-q) came in ahead of MKE/consensus estimates. The recovery was driven by higher taxi operating profit and S$33m COVID-19 relief. That said, ComfortDelGro’s operating performance is improving even with reduced government grants.
  • Reiterate BUY on ComfortDelGro and target price (WACC: 8.2%, LTG: 1%) of S$1.88.
  • We continue to like ComfortDelGro as it offers exposure to domestic transport recovery. The impending review of Downtown Line financing framework and potential restructuring of its Australia bus assets remains a catalyst.
  • Key risk includes further lockdowns in operating countries.

Operating leverage kicked in

  • ComfortDelGro's PATMI of S$56m (+56% y-o-y and 22% q-o-q) came in at 31/27% of MKE/consensus estimate. 1Q21 revenue dipped 0.7% y-o-y to S$856.3m. On a q-o-q basis, all divisions were stable/ improving except for public transport (-5% to S$665.6m) due to a decrease in UK public transport services as a result of nationwide lockdown.
  • EBIT (+45% y-o-y, +12% q-o-q) also continued to improve because of positive operating leverage, despite tapering government grants of S$33.4m, which is expected to halve by 2Q21.
  • ComfortDelGro's cash position grew by S$102m to S$844m as operating cashflow improved. With a stronger balance sheet, management does not rule out resuming interim dividends.

Taxi division saw the most improvement

  • Taxi division EBIT margin continued to expand (15.5% with relief, 11.6% without relief). The turnaround was driven by China, which has recovered to pre-Covid levels, as well as lower rental rebates given to taxi drivers in Singapore. ComfortDelGro expects Singapore fleet size to remain stable at 9.4k. Currently, taxi drivers are entitled to a daily rental rebate of S$25 (S$10 by ComfortDelGro, S$15 by government) till 30 Jun 2021. This amounts to S$26m from ComfortDelGro, we estimate.
  • ComfortDelGro will monitor the COVID-19 situation in Singapore closely to determine whether rental waivers need to be extended.

Unlocking value in Australia

Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-13
SGX Stock Analyst Report BUY MAINTAIN BUY 1.880 SAME 1.880