COMFORTDELGRO CORPORATION LTD (SGX:C52)
ComfortDelGro - Slow Road To Recovery, But Rolling In Cash
- ComfortDelGro (SGX:C52)'s 1Q21 PATMI of S$56.2mn was 29% of our FY21 expectations. Earnings were supported by government relief of S$33mn.
- Public transport EBIT down 47% y-o-y to S$17mn, excluding government relief. Singapore ridership at 65% of pre-pandemic levels. Australia bus services stable.
- FCF surged to S$101.6mn from S$38.6mn in 1Q20. Cash from operations was S$224.9mn (1Q20: S$105.5mn).
- No change in our BUY recommendation and DCF target price of S$1.83 (WACC 7.7%) for ComfortDelGro.
The Positives
Improving taxi profitability.
- Taxi EBIT jumped to S$14mn, excluding relief. This came from lower rebates and operating costs, namely staff costs.
Surging cash flows.
- Operating cash flows more than doubled y-o-y to S$224.9mn, thanks to better profits and government relief.
- ComfortDelGro's net cash spiked to S$338.9mn from S$190.5mn three months earlier.
The Negatives
Public transport’s turnaround weak.
- Public transport EBIT was down 47% y-o-y to S$17mn, excluding relief. Rail revenue was weak, with ridership at 65-79% of pre-COVID 19 levels. Australia was stable while the UK remained affected by a lack of tourism travel.
Outlook
- The recovery is clouded by a resumption of lockdown and stricter social distancing in Singapore. Lower mobility will hurt rail ridership and also raises the need for higher taxi rental rebates from the current S$10/day.
Maintain BUY and target price of S$1.83 for ComfortDelGro
- We keep our FY21e forecasts for ComfortDelGro. DCF target price is maintained at S$1.83.
- While the timing is unclear, any change in the revenue model for the key Downtown Line from fixed fees to risk-sharing with the government could provide stability to its public transport business.
- Singapore’s return to lockdown is expected to delay ComfortDelGro’s recovery this year. Lockdown hurts rail revenue and increases the likelihood of more rental relief for taxi drivers. We are still modelling a recovery this year albeit delayed. Another share price driver will be the restructuring of Downtown Line revenue model.
- In Australia, ComfortDelGro is looking to unlock value from its operations via an IPO or partial sale. Australia accounted for 19% of ComfortDelGro's FY19 EBIT.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-05-17
SGX Stock
Analyst Report
1.830
SAME
1.830
