ComfortDelgro – AmFraser
Operating profit +11%
• Overall a good set of results for ComfortDelGro (CD) for 1QFY10. While net profit was up a modest 3% YoY to $54mil, this was largely due to deferred tax write-back of S$5.2mil in 1QFY09. At operating profit level, CD grew 11% YoY to S$91mil, which is within expectations.
• With operations in Britain accounting for 10% of operating profit, China 12% and Australia 15%, CD benefited from a S$2mil forex translation effect. This was led by 26% YoY appreciation in A$ which offset 8% YoY fall in the Chinese yuan, while the pound sterling was relatively stable, against the S$.
• Operations in Australia was best performing, with revenue growth of 84% and operating profit growth of 90%. Apart from the full consolidation of bus operations in Melbourne (acquired in February 2009), Sydney bus operations enjoyed increased services.
• China operations were moderately healthy in local currency terms, with revenue growth across bus, taxi and all other segments. However, higher costs and continued losses at Shenyang bus business (S$2.6mil) brought 6% YoY fall in operating profit to S$10.5mil. Britain fared poorly, as bus services saw lower contracts and higher ramp up costs for new services in Ireland. Operating profit in Britain fell 17% YoY to S$9mil.
• Singapore made up 57% of revenue (+2% YoY to S$440mil) and 63% of operating profit (+10% YoY to S$57mil). Better perfomances in Rail and Taxi segments offset poor bus operations.
• Seventy-five percent-owned SBS Transit saw a mere 1% YoY growth in ridership to 207 million in 1Q10 while April 2009's adjustment cut average fare by 5% YoY. Rail ridership on the other hand, grew 12% to 36 million, while taxi revenue grew 8% YoY on higher operating fleet.
• Total expenses which grew 6.5% YoY, lagged revenue growth of 7%, marginally improving operating margins to 11.8%. The biggest component – staff costs – rose 10% YoY due to higher headcount particularly for bus operations, and made up 36% of expenses.
• Despite higher oil-prices at 80% higher in 1Q10 compared to 1Q09, CD's oil-related cost items were well-contained as Management had a good hedged position.
• We fine tune our segmental and costs allocations, as bus operations in Singapore and Britain were lower than expected while Australia bus and other segments were better than expected. We also adjust our Sterling/S$ forecast assumption down by 8% to 2.1.
• On balance, the tweak on EPS is insignificant – we maintain growth at 4% p.a. over the forecast period.
• PE stands at 14x FY10F and 13x FY11F. We maintain BUY rating with 26% upside to fair value of S$1.89.