ComfortDelgro – CIMB

Still hit by weak sterling

In line; maintain Underperform. 4Q09 core net profit of S$54.1m (+20.8% yoy) was broadly in line with our estimate (S$53.5m) and consensus. FY09 core net profit rose 26.5% yoy to S$219.5m. We maintain our FY10-11 estimates and introduce FY12 forecasts. Our target price remains S$1.73 (WACC: 10.4%, terminal growth: 2%), still applying a 10% discount to our DCF valuation to account for forex risks. We maintain Underperform given a lack of catalysts. We continue to prefer SMRT to CD given that SMRT should be a bigger beneficiary of the opening of integrated resorts in Singapore, as it has larger train operations. 

Hit by weaker £ and A$. FY09 revenue slipped 2.2% yoy to S$3.1bn, mainly due to a negative forex translation effect of S$102.2m offset by an increase in revenue of S$33.8m. Operating costs of S$2.4bn fell 6.1% yoy with declines mainly in fuel and electricity, materials and consumables and contract services. FY09 EBITDA margin of 20.6% was better than FY08’s 17.4% on lower fuel and energy prices and cost savings from Jobs Credit in Singapore. Overseas operations contributed 43.5% of revenue, up from 42.9% a year ago. CD declared a final dividend of 2.67 cts/share, in line with expectations. Including its interim dividend, FY09 dividend was 5.3cts. 

Operational review. Train revenue rose thanks to higher average ridership (+5.9%) for the North-East Line. However, bus revenue fell mainly due to a negative translation effect from weakness in the sterling and A$. Taxi revenue also fell due to weaker revenue from the UK and Vietnam, partially offset by higher Singapore (rise in cashless transaction volume and a larger fleet) and China revenue (a larger fleet and higher rentals).CD continues to guide that revenue from its UK business will be affected by translation effects from £ weakness.

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