ComfortDelgro – DBS

Stable yoy growth continuing from 2Q

At a Glance

• 3Q09 net profit + 15% yoy; within expectations
• Revenue impacted by FX translation but operating profit grew 17% yoy largely on lower oil prices;
• Steady group operations with diversification helping to balance soft spots (UK taxi, Singapore bus)
• Retain Buy; TP: S$1.83.

Comment on Results

3Q09 net profit within expectations. 3Q09 net profit at S$55.6m (+15.1% yoy, -3% qoq) on the back of a topline of S$782.6m (-3.7% yoy). The drop in revenue was largely a result of negative FX translation effect (-$24.4m) and lower diesel sales. 9M net profit now accounts for c.76% of our full year estimates.

Operating margins improved on lower costs. 3Q EBIT margins improved to 11.6%, from 9.7% a year ago, largely on lower oil prices, lower payment for contract services and Jobs Credit, offset partially by higher staff costs, and other depreciation.

Balance sheet remains strong with a net gearing of 3.4%, from net cash position in Dec 08, due to payment for the acquisition of Kefford in Victoria, Australia.


DTL bid likely in mid 2010. While details are not firmed up and discussions are still at a preliminary stage with the Land Transport Authority, management believes the bidding for Downtown Line (DTL) could be sometime around mid 2010.

Hedged partially on fuel needs till 1Q10. Management indicated that they have hedged c.50% of their fuel needs till 1Q10, and are looking to hedge further into 2010.

Maintain Buy, TP: S$1.83. We continue to like ComfortDelGro for its diversified geographical representation. We see steady growth for the Group going forward, with challenges in certain areas (eg buses in Singapore, taxis in UK) balanced by potential growth in other areas (rail, taxis in China, buses in Australia). The strengthening of AUD is positive for its growing presence there. Maintain Buy, TP: S$1.83 based on a blend of 15x PE and DCF (WACC 9.5%).

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