ComfortDelgro – Phillip

3rd Quarter Results

ComfortDelGro Corp recently announced their third quarter results for the financial year 2009 (“3QFY09”). Group revenue declined 3.7% from $812.6m for 3Q08 to $782.6m for 3Q09. The decrease of $30.0m was due to a negative foreign currency translation effect of $24.4m and a decrease in revenue of $5.6m.

Group operating expenses declined $43.0m or 5.9%, from $734.7m for 3Q08 to $691.7m for 3Q09. This decrease of $43.0m was mainly due to a positive foreign currency translation effect of $21.9m and a decrease in operating expenses of $21.1m. The decrease in operating expenses was due mainly to lower cost of diesel for resale, lower fuel and electricity costs, lower payments to drivers for contract services and the Jobs Credit in Singapore offset by higher staff costs, increase in purchases of vehicles for sale and higher depreciation.

Group operating profit was 16.7% higher than that for 3Q08, increasing from $77.9m to $90.0m for 3Q09. Group profit attributable to Shareholders of the Company was $7.3m or 15.1% higher, increasing from $48.3m in 3Q08 to $55.6m in 3Q09.

Bus revenue segment. At Group level, the third quarter bus business declined by 0.6% to $400.9m as growth in bus operations in Australia and China was offset by declines in Singapore and the UK. For the Group’s Australian business, ComfortDelGro Cabcharge Pty Ltd saw revenue jump by 40.6% to $76.9m boosted by contributions from the new operations in Victoria.

The China operations in Shenyang continued to experience strong ridership growth resulting in bus revenue to grow 10.0% to $15.4m for 3Q09.

Revenue from scheduled bus services under SBS Transit fell by 9.6% to $136.3m for the quarter due to the temporary fare reduction, increase in the transfer rebate and a drop in ridership by 2.9%.

The bus business in UK was 6.3% lower at $158.3m due to the weakening Sterling Pound. If the impact of the foreign currency was removed, revenue would have actually increased by 5.9%.

Taxi revenue segment. At Group level, third quarter revenue for the taxi business fell by 4.0% to $229.8m compared to the same period last year as revenue increases in Singapore and China were more than offset by declines in the UK and Vietnam.

Singapore’s taxi business increased by 2.0% to $159.4m due mainly to a higher volume of cashless transactions and a larger operating fleet.

China’s taxi operations increased by 4.6% to $32.0m due to increases in fleet sizes. The recent acquisition of Beijing Jia Run Taxi Co. Ltd and increases in the number of taxi licenses in Jilin City, Nanjing, Nanning and Shanghai also helped boost revenue for the quarter.

The UK’s taxi business fell by 26.5% to $36.9m due to a decline in corporate bookings and the negative translation effect of the weaker Sterling Pound. In Vietnam, revenue from the taxi business fell by 31.8% to $1.5m due to a drop in operating fleet.

Rail revenue segment. The rail operations saw a rise in revenue by 0.7% to $27.4m due to continued ridership growth. Average daily ridership for the North East Line grew by 3.9% to 328,000 while the Punggol and Sengkang LRTs increased by 3.1% to 47,000.

Bus Station revenue segment. Revenue from the bus station business under Guangzhou Xin Tian Wei increased by 3.9% to $5.3m due to an increase in the number of bus trips operated.

Vehicle Inspection and Testing revenue segment. Vehicle inspecting and testing operations increased by 0.5% to $19.9m due mainly to growth in the non-vehicle testing business under Setsco Services Pte Ltd.

Upgrade to BUY with an adjusted fair value estimate of S$1.78. Given the lower fuel & electricity costs as well as the decline in the cost of materials and consumables, we have adjusted our operating expenses downwards, leading to a stronger operating profit for our forecasted figures, arriving at an increased fair value of S$1.78. As this represents an upside potential of 16.3% from the last done price of
$1.53, we are upgrading to a BUY based on our stock selection system.

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