ComfortDelgro – JPM

2Q FY10 results: strength in Singapore taxis and Australia bus

2Q net profit in line: Net profit of S$58.2 (+1.6% Y/Y) was in line with expectations with revenue growth of 4.1% driven by good performance at (1) CDC NSW; (2) SBS Transit; (3) Singapore taxi; (4) NEL and (5) China driving centre. Interim DPS of 2.70 cents was declared (50% payout ratio).

Singapore taxis posted strong EBIT growth: Singapore taxi revenue grew 9.2% Y/Y on the back of larger operating fleet and higher volume of cashless transactions. Management highlighted that it added 307 taxis in the last quarter and enjoys a near zero idle rate, with a waiting list of prospective taxi hirers. Notably, operating profit grew a strong 38% Y/Y as margin improved from 10% to 12.7%.

Australia bus performance strong: Australia bus revenue/EBIT grew 34%/37% Y/Y as more bus services were contracted by CDC NSW and Victoria, and partly buoyed by the stronger AUD. For 2Q10, Australia bus was the second largest operating profit contributor (16% of group) after Singapore taxi, despite accounting for just 11.5% of group revenue, due to its high operating margin at 17%.

Energy costs increase: Fuel and electricity costs rose 22.3% Y/Y mainly due to higher diesel costs which were not fully hedged as well as increased consumption. Management is taking advantage of the recent retreat in oil price to hedge its requirement ahead.

Downtown Line tender update: Management expects tender for the DTL to be issued in Sep/Oct 2010 with the submission of the bid in early 2011. We continue to see its subsidiary, SBS Transit, well positioned to win.

Positive organic growth outlook: Management sees stronger revenue for Singapore and Australia bus on stronger ridership (2Q10: +4% Y/Y) and increase in demand for bus frequencies respectively. It also expects Singapore taxi revenue to increase potentially from higher average rentals with new replacement taxis and possibly also from fleet additions to take advantage of the higher demand. Rail ridership, which grew 13% YTD should continue to see ridership growth and benefit from transfer commuter traffic with the ramp up of SMRT’s Circle Line. Maintain OW.

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