ComfortDelgro – Lim and Tan

• There is little in Comfort Delgro’s Q4 results (net profit almost unchanged at $54.6 mln) to enthuse investors, other than perhaps the moderate 0.13 cent / 5% increase in final dividend to 2.8 cents (reflecting the 4.1% profit increase for the full year), and bringing the total for the year to 5.5 cents vs 5.3 cents for 2009. Yield is 3.5% @ $1.56. (SMRT, at $2.04 offers a superior 4.2% yield based on 8.5 cents for the 12 months to Sept ’10.)

• Operationally, there is also little to suggest Comfort Delgro is about to break out of its tight price range: since mid ’09, the stock has, with brief exceptions, largely traded between $1.45-1.54. The recent high was $1.69 reached a year ago.

• One of the reasons for our lack of enthusiasm is the group’s regional diversification (buses and taxis in UK, China, Australia), which does not appear to have found favor with local investors either despite BUY calls by many. Indeed, the latest period was affected by the weakness of sterling pound and to some extent renminbi.

• We maintain the only company within the group worth investing in is Vicom, which however is so thinly traded.

• Prospects for the vehicle inspection business remain strong given the age profile of vehicles in Singapore, as well as the sharp drop in vehicle deregistrations.

• Vicom declared a special dividend of 3.2 cents for 2010, bringing the total to 16.1 cents (vs 11.8% for 2009) for a yield of 5.3% at $3.01 yesterday. The stock, not surprisingly is at its highest since listing in 1995.

• Vicom, which has 87.17 mln shares outstanding, is 68.19% owned by Comfort Delgro and 3.44% by Fidelity Management.

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