ComfortDelgro – UOBKH

Share-swap to result in S$26.5m exceptional gain. Maintain HOLD

Share-swap to result in one-time gains. ComfortDelgro Corporation (CD) announced that it will transfer 16% of its subsidiary, CityFleet (UK), to Cabcharge (CAB AU, Not Rated), in return of about 2.5% stake increase in the latter. This would result in a one-time gain of S$26.5m or an earning or NAV per share increase of 1.27 S cents in FY08.

The share-swap is to strengthen the relationship between CD and CAB for the future growth. CD conducted a similar share-swap exercise in Nov 2006, which also reported an exceptional gain at S$41.7m in FY06. These two companies set up a joint venture to acquire the Westbus group in 2005, which has strengthened CD’s presence in Australia. The Australia market contributed 7.6% of CD revenue in 1QFY08.

Maintain HOLD. We have incorporated the exceptional gain of S$26.5m into our FY08 earning forecasts, while still maintaining our core earning forecasts. Upside surprises could come from oil price corrections and CD’s overseas expansion.

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