ComfortDelgro – DBS

Taking comfort in our numbers

Story: Post 3Q08, we revisit our assumptions on ComfortDelGro arising from: (i) lower crude oil price; (ii) its A$149m acquisition of Kefford Group in Victoria, Australia (iii) changes to our forex assumptions (GBP and AUD, against SGD).

Point: Our revisions are as follows:

1. Crude oil price assumption lowered to US$60/bbl and US$70/bbl in 2009-10, from US$80/bbl. The net positive change is S$38.5m and S$21.8m.

2. Kefford Group acquisition. The A$149m acquisition was announced on 20 Nov. Our estimate of the net profit contribution to CDG is S$5.7m in FY09 and S$5.9m in FY10. We view this acquisition as positive and are in line with the Group’s strategy to achieve 70% revenue contribution from overseas by 2012. Its existing operational experience in Australia reduces operating risks for this venture, in our view.

3. Lower forex assumption. We revised our GBP and AUD (against SGD) down to S$2.30/GBP and S$0.98/AUD. These change our forecast by -S$41.5m and -S$45.5m for FY09F
and FY10F respectively.

The net impact is minimal on our FY09F earnings but our FY10F has been trimmed down by 8%, largely due to a smaller revision in oil price (to US$70/bbl vs US$60 for ‘09F).

Singapore bus/train ridership remain robust. Bus and train (NEL) ridership grew 4% and 16% y-o-y in Oct. YTD, ridership growth of 6% (bus) and 16% (train) is in line with our FY08F assumption.

Relevance: Despite the downturn, we believe the Group’s business will be relatively less affected given its exposure in the public transport. We also like CDG for its strong balance
sheet and healthy operating cashflow. Maintain Buy. Our TP is maintained at S$1.59, still pegged to 15x on FY09F.

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