ComfortDelgro – DMG

Invests S$31.2m in third driving school in China

Third driving school in China. ComfortDelGro (CD) has acquired a new site in Liangjiang New Business District, Western China, to establish its third driving school – Chongqing Liangjiang ComfortDelGro Driving Training Co (CLCDT). The site measures 44,693 sqm and will be ready by end of FY11. The three-storey building will comprise of a training centre, an administrative centre, a testing circuit, as well as a basement car park. The new school will provide driver training for saloon cars, buses as well as trucks. Total investment in the new driving school is expected to be RMB165m (S$31.2m). Upon completion, we estimate the new investment will contribute additional S$1-2m/year beginning FY12 (~0.4-0.8% of FY12 PATMI). Maintain BUY with unchanged TP of S$1.80.

Expect to house 120 vehicles and cater to initial monthly average of 700 students. During FY10, 13,860 Chinese students enrolled for CD’s two other driving school centres in China (Chengdu ComfortDelGro Qing Yang Driving School Co Ltd and Chongqing ComfortDelGro Driver Training Co Ltd). Given the FY10 EBIT contribution from CD’s China driving centres was S$1.6m, the average EBIT/student was ~S$115. Based on this, we estimate CLCDT will contribute ~S$1-2m/year beginning FY12. We think the earnings contribution from CLCDT could rise in the future once the number of student enrolment increases.


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