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

COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - Recovery Mode

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.

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 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.

ComfortDelGro is exploring options to unlock value in Australia, either through a partial sale of its Australian assets or an IPO. That said, ComfortDelGro has no plans to exit the Australia market and it’s still in the early stage of reviewing its Australia portfolio.
ComfortDelGro's management is also open to paying special dividends with the proceeds if any deal comes through.
See

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