ComfortDelgro – OSK DMG

SLF Sell-Down Presents Opportunity

Singapore Labour Foundation (SLF), ComfortDelGro’s (CD) biggest shareholder is paring down its stake via a block trade of 170m shares worth c.SGD330m. SLF’s stake will fall c.8ppt to c.3.9%. CD’s share price fell 12% on Thursday, which we believe presents a good buying opportunity. We are not concerned by the sell-down as fundamentals remain strong. Maintain BUY and TP of SGD2.25.

12% sell-down presents a good opportunity to accumulate. CD’s share price fell 12% last Thursday following the paring down of SLF’s stake. We think this sell-down is unwarranted given that company fundamentals remain intact, and this presents a good entry point for investors looking to accumulate.

This could simply be a timely exit for SLF. SLF is a statutory board of the Ministry of Manpower (MOM) that aims to develop Labour Movement that support Singapore’s growth as well as the well-being of working people in Singapore. As CD’s overseas businesses grew and now accounting for 46% of group operating profit, coupled with CD’s aim to hit 50% profit contribution from overseas, we think that SLF’s involvement with CD could be less relevant now. Moreover, with the recent 32% six month run up in share price (22 May 13 close), we think SLF simply sees this period as an opportunistic time to exit.

No change to business fundamentals, no reason for sell-down. We understand that SLF had been a passive shareholder holding one nonexecutive board seat. We believe the fundamentals of CD remain unchanged and still remain positive on its overseas growth potential to drive earnings.

CD remains our preferred pick. At a FY13 P/E of 15.5x, CD is still more attractive than SMRT’s 24.5x FY14 P/E (FYE Mar). We like CD’s strong overseas network, which enhances overseas growth prospects versus SMRT which still faces cost related challenges.

ComfortDelgro – OSK DMG

SLF Sell-Down Presents Opportunity

Singapore Labour Foundation (SLF), ComfortDelGro’s (CD) biggest shareholder is paring down its stake via a block trade of 170m shares worth c.SGD330m. SLF’s stake will fall c.8ppt to c.3.9%. CD’s share price fell 12% on Thursday, which we believe presents a good buying opportunity. We are not concerned by the sell-down as fundamentals remain strong. Maintain BUY and TP of SGD2.25.

12% sell-down presents a good opportunity to accumulate. CD’s share price fell 12% last Thursday following the paring down of SLF’s stake. We think this sell-down is unwarranted given that company fundamentals remain intact, and this presents a good entry point for investors looking to accumulate.

This could simply be a timely exit for SLF. SLF is a statutory board of the Ministry of Manpower (MOM) that aims to develop Labour Movement that support Singapore’s growth as well as the well-being of working people in Singapore. As CD’s overseas businesses grew and now accounting for 46% of group operating profit, coupled with CD’s aim to hit 50% profit contribution from overseas, we think that SLF’s involvement with CD could be less relevant now. Moreover, with the recent 32% six month run up in share price (22 May 13 close), we think SLF simply sees this period as an opportunistic time to exit.

No change to business fundamentals, no reason for sell-down. We understand that SLF had been a passive shareholder holding one nonexecutive board seat. We believe the fundamentals of CD remain unchanged and still remain positive on its overseas growth potential to drive earnings.

CD remains our preferred pick. At a FY13 P/E of 15.5x, CD is still more attractive than SMRT’s 24.5x FY14 P/E (FYE Mar). We like CD’s strong overseas network, which enhances overseas growth prospects versus SMRT which still faces cost related challenges.

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