ComfortDelgro – DBSV
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• 1Q10 net profit at S$54.3m (+3% yoy) within expectations
• Muted quarters ahead with flat to lower yoy growth on weaker GBP
• Negatives from GBP priced in, but no re-rating catalyst in sight
• FY10/11F lowered by 5%/10%; Downgrade to Hold, TP: S$1.64.
1Q10 +3% yoy within expectations; expect muted quarters ahead. 1Q10 net profit at S$54.3m (+3% yoy) was within our expectations, forming c.25% of our full year estimates. But, we expect lackluster earnings in quarters ahead, possibly with a downward trend on impact of a weaker GBP against SGD (translation impact). We have lowered our exchange rate assumption for GBP/SGD to S$2/GBP in FY10F/11F, from 2.15 previously, in view of the significantly weaker GBP.
… weaker GBP has been priced in for now. ComfortDelgro’s share price has depreciated by c.6% in the past 2 weeks on the weaker GBP. We believe the impact from a weaker GBP is priced in. We estimate for every 10% depreciation of GBP vs SGD, Group operating profits will decline by c.1%.
Cut forecasts by 5%/10% in FY10F/FY11F, downgrade to Hold, no significant catalyst. We lower FY10F/11F by 4.5% in FY10F and 9.7% in FY11F. Our PE/DCF derived TP is cut to S$1.64, and we downgrade our recommendation to Hold, from Buy. We believe much of the negatives (weak GBP) have been priced in. But, we also do not expect any significant rerating on the counter in the near term given the mixed growth from its geographically diverse operations. Upside/downside risks to our call are significantly movements in SGD against foreign currencies, weaker/stronger oil price, potential award of Downtown Line MRT contract in Singapore, and acquisitions.