ComfortDelgro – DBSV

Another record year

  • Record 4Q/FY13 profits within expectations
  • Dividend payout inched up to 56.5% with 4 Scts final DPS (FY13: 7Scts vs FY12: 6.4 Scts)
  • Healthy balance sheet to pursue growth via M&As; medium term target of 60% overseas contribution
  • Steady profile; maintain BUY rating and S$2.19 TP

4Q13 results in line. 4Q13 net profit inched up 4% y-o-y to S$59.9m, taking FY13 net profit to a record S$263m (+6% yo-y), despite cost challenges, particularly in Singapore. 4Q revenue grew 9.5% y-o-y driven by all segments except Automotive Engineering. However, EBIT margin dipped 1ppt to 9.6% on higher operating expenses (+10.7%), largely staff costs (+17.7%), fuel & electricity (+21.1%), but there were partly offset by lower materials & consumables costs (-10%).

Higher dividend payout. The Group declared 4 Scts DPS in the quarter, taking full year dividends to 7 Scts. This implies 56.5% payout (FY12: 6.4 Scts, 54.2% payout).

Healthy balance sheet to pursue growth. The Group is in net cash position which means it has headroom to pursue growth and/or raise dividend payouts. Either option could be a share price catalyst. Management has a medium term (5-7 years) target to increase overseas profit contribution to 60%, from 48% currently; we believe the Group would achieve this via M&As. We like the Group’s strategy and track record of bite-sized accretive acquisitions.

Maintain BUY for steady profile; TP S$2.19. Despite challenges at its Singapore bus and rail operations as well as a rising cost environment, the Group has been delivering steady growth. We attribute this to its geographical and business diversification. This differs markedly from its local peer, SMRT. Valuation remains reasonable at 15x FY14F PE.

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