ComfortDelgro – Kim Eng

Delivering the Goods

Positive 3QFY12 results delivered. ComfortDelGro (CDG) delivered a positive set of 3QFY12 results, recording a 5.4% YoY increase (+SGD3.7m) in PATMI to SGD72.8m. These results were largely in line with expectations given that 9MFY12 PATMI comprised 78-79% of ours and consensus’ full-year estimates, and noting that 4Q has been a historically weaker quarter. We maintain our BUY call on CDG as our preference in the Singapore Land Transport sector, Target Price unchanged at SGD1.94.

Taxis once again lead profit growth. CDG’s 3QFY12 operating profit growth of 2.8% (+SGD3.2m) YoY was boosted by its taxi segment which showed an improvement of 8% (+SGD3.0m). In particular, the Singapore taxi segment drove the profit growth, as it was a beneficiary of higher rental income from replacement taxis and a larger fleet, as well as a higher volume of cashless transactions.

Buses and Rail bring up the rear. CDG’s bus business recorded a marginal operating profit growth of 1% YoY (+SGD0.6m), primarily helped by its UK and Australia businesses growing 6% and 2% respectively. The rail segment was the poorest performer, showing a 63% drop YoY (-SGD4.5) in operating profit, caused by start-up staff costs of the Downtown Line and higher repair and maintenance costs.

Outlook of revenue growth. Management’s revenue outlook remained upbeat, as it expects revenue to grow or at least be maintained in all segments except its bus business in China (divestment of Shenyang CDG) and its taxi business in UK (UK austerity measures).

Maintain BUY, reiterate preference over SMRT. We continue to prefer CDG in the Singapore land transport sector for its diversified business model, which not only provides additional avenues for growth, but also shields it from country-specific challenges (eg: Singapore). We leave our forecasts largely intact, and reiterate our BUY call and Target Price of SGD1.94, which is pegged to 16x FY13 PER.

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