ComfortDelgro – UOBKH

Setting a new target for oversea revenue contribution

ComfortDegro has just announced a new target, ie, 70% of turnover to be contributed by oversea markets in the next five to seven years. This is up from the previous 50% target set a few years back, which the company is well on track to realize. At this juncture, oversea markets contributed 47.0% and 46.2% of turnover and operating profit respectively in FY07, vs 44.6% and 42.3% in FY06.

Strong execution capabilities in oversea expansion. ComfortDegro has grown its oversea markets via both organic growth and acquisition. Turnover of oversea markets grew at a CAGR of 15.4% from 2003 to 2007, significantly higher than that of its home market (Singapore) at 4.7%. Push for a wider use of public transport is an important approach by governments to alleviate traffic congestion and pollution issues linked with massive private vehicle ownership. We believe this bodes well for public transport operators like ComfortDegro in the long term.

BUY ComfortDegro. We like the company’s diversified exposure in land transport business. Its decent 6-7% dividend yield has limited downside risks under current volatile market environments. (Target price under review. previous: S$2.46)

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