ComfortDelGro - Phillip Securities 2021-08-19: Clearer Recovery Path

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COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - Clearer Recovery Path

• ComfortDelGro (SGX:C52)'s 1H21 results within expectations. Revenue and PATMI of S$1,742mn/S$91mn form 46%/46% of our FY21e estimates. Earnings include government relief of S$57.2mn.
• Largest turnaround in taxi division. EBIT improved S$89.4mn in 1H21 despite continued rental discounts. Taxi rental rebates in Singapore of 20% in 1Q21 rose to 35% in 2Q21 due to Phase 2HA.
• Singapore is transitioning to endemic COVID-19. This implies an end to lockdowns as vaccinations make good progress. Our FY21e forecasts are unchanged. DCF target price (WACC 7.7%) maintained at S$1.83.

ComfortDelGro's 1H21 - The Positives

Operating leverage intact.

• Revenue rose S$208mn y-o-y to S$1.74bn. Due to the business’ large fixed costs, around three-quarters of the revenue increase or S$154mn immediately translated into higher earnings. Taxis benefited from lower rental discounts while public transport gained from higher rail ridership and fuel indexation.

Return of interim dividends.

• FCF in 1H21 was S$287mn, up from S$189.1mn in 1H20. Interim dividend of S$0.021 represents a payout of 50%. This is still below the S$0.045 and 66% paid out before the pandemic in 1H19. Capex will likely trend below pre-pandemic S$300mn levels as a programme to purchase hybrid taxis is in its last stages with 600-700 units left to be purchased.

ComfortDelGro's 1H21 - The Negatives

• Nil.

Outlook

• Operating leverage and end of lockdowns are earnings catalysts, in our view. Pre-pandemic revenue and operating profit in 1H19 were S$1.92bn and S$222mn respectively. These compares with current operating profits before government relief of S$77mn. Our FY22e forecastes assume a close-to-full recovery to pre-pandemic levels.

Maintain BUY and target price of S$1.83

• No changes to FY21e forecasts and DCF target price of S$1.83 for ComfortDelGro.
• Upside to share price includes a restructuring of the Downtown Line under a new rail-financing model, in our view. This would essentially de-risk its rail business away from ridership to fixed fees.
• See
  • ComfortDelGro's Share Price,
  • ComfortDelGro's Target Price,
  • ComfortDelGro's Analyst Reports,
  • ComfortDelGro's Dividend History,
  • ComfortDelGro's Announcements,
  • ComfortDelGro's Latest News.
• ComfortDelGro is our preferred transport proxy for Singapore’s reopening and normalisation. ComfortDelGro's balance sheet strengthened in past 12 months despite pandemic. Net cash of S$493mn in 1H21, up from S$73.8mn in 1H20.

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-08-19

SGX Stock Analyst Report BUY MAINTAIN BUY 1.830 SAME 1.830