ComfortDelgro – DBSV

Another record year

  • 4Q within expectations; FY12 a record year
  • Final DPS of 3.5 Scts, equating to payout of 54% for FY12
  • Balance sheet remains strong to pursue inorganic growth
  • Trading at lower valuations compared with SMRT despite geographical exposure, stable growth. BUY, TP: S$2.05

Highlights

4Q within expectations. 4Q12 net profit increased by 2% y-o-y to S$57.6m, ending FY12 at a record profit of S$248.9m (+6% y-o-y), within our forecasts (S$248m). 4Q revenue rose by 2%, driven by all business segments, except bus station and automotive engineering in China. EBIT margins dipped marginally to 10.6% (4Q11: 10.8%) as operating expenses rose by 2% mainly from higher staff costs (+6% to S$284.3m) and contract services (+12% to S$121.4m), offset partially by lower materials and consumables (-11% to S$79.8m) and fuel and electricity costs (-13% to S$64.3m).

Hedging energy/fuel as in 2012. Management indicated that they have hedged 60% and 40% of its fuel requirements in Singapore and the UK, respectively. This should continue to provide visibility and stability to its earnings in 2013, as in 2012.

DTL incurred a loss of S$6.1m. Staff recruitment is expected to continue towards the operation of Downtown MRT Stage 1 (DTL1) in 2013 with about 400 staff, up from 210 currently. While we expect losses to continue as operations ramp up, this should not pose a huge impact to the group given its larger size and geographical/ business diversification, in our view.

Our View

Dividend per share of 3.5 Scts. Final dividend of 3.5 Scts was proposed (FY12: 3.3 Scts). Coupled with the interim dividend of 2.9 Scts, this equates to a total payout of 6.4 Scts (54% payout ratio). Capex requirements are projected to taper off in FY14F, and we remain hopeful that dividend payout could increase.

Preferred land transport play, strong balance sheet. CD remains as our preferred land transport play given its stable growth profile, geographical diversification and strong balance sheet to pursue inorganic growth. Net debt to equity stands at 0.3%, down from 2.2% in FY11.

Recommendation

Maintain BUY, TP at S$2.05. Our TP is based on DCF (WACC: 10%, t=1%) and 15x average FY13F/14F PE. This implies 16.3x /15.8x PE on FY13F/14F, slightly above its historical average of 15x, but significantly below SMRT’s 22x FYE Mar14F PE.

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