ComfortDelgro – CIMB

SLF sale does not alter fundamentals

ComfortDelGro’s shares tumbled by 13% today on news of a stake sale by its major shareholder, Singapore Labour Foundation. We believe the market’s knee-jerk selling is overdone and the share price could bounce in the near term.

 

Nevertheless, we maintain our fundamental Neutral rating, EPS and S$1.94 target price (DCF, 7.3% WACC) as challenging domestic operations and margin compression from higher opex continue to call for caution.

What Happened

ComfortDelGro’s share price skidded 13% today on news that its major shareholder, Singapore Labour Foundation (SLF),trimmed its stake from 12% to 4%.SLF placed out its shares at S$1.94apiece, at the low end of its reported S$1.94-2.03 offer range. The identity of the buyers remainsunknown, but we think they could be long-term investors. Regulatory filings will be made by 28 May, should there be changes to CD’s substantial shareholders.

What We Think

CD’s share price has fallen below its S$1.94 placement price. We think the pullback is overdone and the shares may rebound in the near term, in view of :1) CD’s unchanged fundamentals with defensive earnings; 2)3% dividend yield support; and 3) the absence of dilution from the placement, which involves only vendor shares. While the reasons for SLF’s divestment are unknown, we understand that its ownership of CD’s shares was legacy-related. SLF has, over the years, been paring down its stake in CD, to 4% today.

What You Should Do

Further deterioration in CD’s share price could present opportunities to accumulate. We would turn buyers at S$1.82 or 14x CY14 P/E, its 5-year mean.

ComfortDelgro – CIMB

SLF sale does not alter fundamentals

ComfortDelGro’s shares tumbled by 13% today on news of a stake sale by its major shareholder, Singapore Labour Foundation. We believe the market’s knee-jerk selling is overdone and the share price could bounce in the near term.

 

Nevertheless, we maintain our fundamental Neutral rating, EPS and S$1.94 target price (DCF, 7.3% WACC) as challenging domestic operations and margin compression from higher opex continue to call for caution.

What Happened

ComfortDelGro’s share price skidded 13% today on news that its major shareholder, Singapore Labour Foundation (SLF),trimmed its stake from 12% to 4%.SLF placed out its shares at S$1.94apiece, at the low end of its reported S$1.94-2.03 offer range. The identity of the buyers remainsunknown, but we think they could be long-term investors. Regulatory filings will be made by 28 May, should there be changes to CD’s substantial shareholders.

What We Think

CD’s share price has fallen below its S$1.94 placement price. We think the pullback is overdone and the shares may rebound in the near term, in view of :1) CD’s unchanged fundamentals with defensive earnings; 2)3% dividend yield support; and 3) the absence of dilution from the placement, which involves only vendor shares. While the reasons for SLF’s divestment are unknown, we understand that its ownership of CD’s shares was legacy-related. SLF has, over the years, been paring down its stake in CD, to 4% today.

What You Should Do

Further deterioration in CD’s share price could present opportunities to accumulate. We would turn buyers at S$1.82 or 14x CY14 P/E, its 5-year mean.

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