ComfortDelGro - Maybank Research 2022-03-10: En Route To Recovery

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COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - En Route To Recovery

ComfortDelGro's FY22-24E EPS below consensus on tighter margins

• We are updating our FY22-24E EPS estimates for ComfortDelGro (SGX:C52) to factor in the recent fare hikes (Bus/train: +2.2% wef 26 Dec 21; Taxi: +7.7% wef 1 Mar 22) but offset by the tapering of government relief (FY21: S$84.6m), and more conservative EBIT margins due to higher energy and staff costs. This reduces our DCF-based target price for ComfortDelGro by 6% to S$1.76 (WACC: 8.3%, LTG: 1%).
• Maintain BUY as we continue to see ComfortDelGro as a good proxy to border reopening and rising economic activity.
• Transfer coverage to Eric Ong.

Expect ridership to improve further

• Turnover from its offshore operations accounted for 46.2% of ComfortDelGro's revenue in FY21 compared to 45.4% previously.
• Contribution from public transport services are expected to improve as rail ridership in SG, bus charter in AU and coach services in the UK continue to recover in tandem with higher social mobility.
• The taxi segment should also perform better on lower rental rebates (FY21: S$87.1m) as driver incomes are likely to improve on easing COVID-19 restrictions and resumption of international travel.

Looks to scale up logistics business via M&A

• Underpinned by strong operating cashflow, ComfortDelGro's gross gearing ratio improved to 12.7% (at end-Dec 2021) compared to 18.0% a year ago. This allows ComfortDelGro to pursue synergistic M&A opportunities, possibly in logistics transportation, which may even include taking stakes in related properties such as warehouses.
• Other re-rating catalysts could include potential unlocking of value for its Australian assets.

Solid balance sheet with forward yield of 4-5%

• In our view, FY21 marks the beginning of a stronger recovery as Public Transport Services continue its sequential improvement, while its Taxi business has also turned around in 4Q21. ComfortDelGro has a rock solid balance sheet with net cash position of S$519.8m at end-Dec 2021.
• ComfortDelGro just declared a final dividend of S$0.021, taking FY21 dividend to S$0.042 (FY20: S$0.0143), which translates into a sustainable payout ratio of 70%.
• See
  • ComfortDelGro's Share Price,
  • ComfortDelGro's Target Price,
  • ComfortDelGro's Analyst Reports,
  • ComfortDelGro's Dividend History,
  • ComfortDelGro's Announcements,
  • ComfortDelGro's Latest News.

Eric Ong Maybank Research | https://www.maybank-ke.com.sg/ 2022-03-10

SGX Stock Analyst Report BUY MAINTAIN BUY 1.76 DOWN 1.880