ComfortDelgro – OCBC

Fairly valued at this point

  • 2Q13 results in-line
  • A smooth 2H13 to be expected
  • But limited upside for time being

2Q13 results within expectations

ComfortDelGro’s (CDG) 2Q13 results were in line with expectations. Higher bus/rail ridership and rental income from its taxi fleet boosted revenue by 2.7% YoY to S$908.4m while operating profit grew by 6.0% to S$112.6m as lower fuel costs helped to improve operating margin (12.4% vs. 12.0% in 2Q12) and offset higher staff costs. 2Q13 PATMI came in 6.0% higher YoY at S$68.9m. For 1H13, CDG announced an interim dividend of 3 S cents (vs. 2.9 S cents for 1H12).

More of the same for 2H13

For 2H13, we expect continued revenue growth for SG operations (bus, rail and taxi) while Australia and UK bus operations should see slight increments from contributions of recent acquisitions. Cost pressures related to higher staff costs (ramp up of Downtown Line etc) are to be expected but the current fuel environment and hedges in place should help to mitigate the impact on operating margins.

Region 4 auction & SG fare review

Nonetheless, there exist some dampeners. Although management expressed confidence in re-securing bus services to Region 4 (NSW, Australia) – the results of the tender process will be known by end-Aug/early-Sep – lower operating margins are to be expected given the increase in competitive pressures. In addition, any SG fare increases are only likely to be known in late 4Q13 or early-FY14.

HOLD for now

We leave our FY13 forecasts unchanged given the in-line results. However, while we continue to prefer CDG over SMRT for its management and more diversified earnings streams, we feel that much of the upside has been priced in already and the lack of any near-term catalysts limit further gains. Therefore, we downgrade CDG to HOLD for the time being and maintain our fair value estimate at S$1.95.

ComfortDelgro – OCBC

Fairly valued at this point

  • 2Q13 results in-line
  • A smooth 2H13 to be expected
  • But limited upside for time being

2Q13 results within expectations

ComfortDelGro’s (CDG) 2Q13 results were in line with expectations. Higher bus/rail ridership and rental income from its taxi fleet boosted revenue by 2.7% YoY to S$908.4m while operating profit grew by 6.0% to S$112.6m as lower fuel costs helped to improve operating margin (12.4% vs. 12.0% in 2Q12) and offset higher staff costs. 2Q13 PATMI came in 6.0% higher YoY at S$68.9m. For 1H13, CDG announced an interim dividend of 3 S cents (vs. 2.9 S cents for 1H12).

More of the same for 2H13

For 2H13, we expect continued revenue growth for SG operations (bus, rail and taxi) while Australia and UK bus operations should see slight increments from contributions of recent acquisitions. Cost pressures related to higher staff costs (ramp up of Downtown Line etc) are to be expected but the current fuel environment and hedges in place should help to mitigate the impact on operating margins.

Region 4 auction & SG fare review

Nonetheless, there exist some dampeners. Although management expressed confidence in re-securing bus services to Region 4 (NSW, Australia) – the results of the tender process will be known by end-Aug/early-Sep – lower operating margins are to be expected given the increase in competitive pressures. In addition, any SG fare increases are only likely to be known in late 4Q13 or early-FY14.

HOLD for now

We leave our FY13 forecasts unchanged given the in-line results. However, while we continue to prefer CDG over SMRT for its management and more diversified earnings streams, we feel that much of the upside has been priced in already and the lack of any near-term catalysts limit further gains. Therefore, we downgrade CDG to HOLD for the time being and maintain our fair value estimate at S$1.95.

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