ComfortDelGro - OCBC Investment 2022-04-18: Gradual Recovery


ComfortDelGro - Gradual Recovery

  • Rail ridership in March at 70% of pre-COVID levels.
  • Sharing the burden of higher energy costs.
  • ESG rating improved.

Moving along with the market so far this year and on the road to recovery

  • Year-to-date (based on 15 April 2022 closing prices), ComfortDelGro (SGX:C52) has delivered total return of 7.9% compared to the Straits Times Index (STI) which has returned 7.5% over the same period.
  • In line with easing COVID-19 restrictions in ComfortDelGro’s key geographies (Singapore, the UK, Australia), there has been improving mobility data in these countries. We expect further recovery ahead, with the Singapore government taking a decisive step towards re-opening. Border restrictions have largely been lifted, as vaccinated travellers into Singapore are no longer required to take vaccinated travel lane (VTL) flights or undergo an ART test within 24 hours of arrival.

Average daily rail ridership in March 2022 was 70% of March 2019 before COVID-19

  • Singapore’s train system is currently run by two public transport operators – SMRT Corporation and SBS Transit; the latter is under ComfortDelGro. The North East Line (NEL), Downtown Line (DTL) and Sengkang and Punggol Light Rail Transit are under SBS Transit, and the average daily rail ridership in the month of March 2022 was 853,049, which was about 70% of the figure in March 2019, prior to COVID-19. This was higher than the corresponding 66% level in February 2022.

Sharing the cost burden with taxi drivers as fuel prices rise

  • Fuel prices have risen considerably, and it will not be surprising to see further increases in transport costs should energy prices remain elevated. Around the end of March, ComfortDelGro announced a token S$0.01 increase in taxi fares from 4 April, and we think it will also take time for rent rebates to decrease for drivers. ComfortDelGro is absorbing a large part of the increase in hirers’ fuel cost, which may weigh on margins in the meantime.

S$0.042/share of dividend in 2021, still less than half pre-COVID

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-04-18
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