ComfortDelgro – Maybank Kim Eng

Yet another solid quarter

  • 1Q14 net income up 9.7% YoY to SGD63.3m, in line with expectations.
  • Broad-based revenue growth heartening; 1Q14 loss of SGD6.8m on track to meet our full-year forecast for SGD25m.
  • DTL ridership still encouraging. Reiterate BUY with unchanged TP of SGD2.40.

 

What’s New

ComfortDelGro (CDG) reported yet another set of solid results for 1Q14, with net income up 9.7% YoY to SGD63.3m, in line with our expectations. Revenue improved across all major segments of its business except for a marginal decline in the car rental and leasing operations. The group also benefitted from the impact of foreign currency translation, with the British pound and Chinese yuan strengthening by around 9.5% and 4.5% respectively over the same period last year. Management was unfazed by the growing presence of third-party taxi booking apps, citing an increase in bookings through its system during the quarter. Downtown Line (DTL) losses for 1Q14 hit about SGD6.8m, tracking our full-year forecast for SGD25m. Average daily ridership for the line was also encouraging at 57,000 in April (1Q14: 54,000) against the target of 75,000.

What’s Our View

CDG’s strong 1Q14 results reaffirm our choice of the stock as the preferred exposure to Singapore’s Land Transport sector. Three factors are in favour of CDG. First, its large taxi fleet in Singapore enables it to consistently report industry-high earnings. Second, its diversified geographical and business exposure offers investors stable and sustainable investment returns. Third, the full opening of the DTL over the next three years will see SBS Transit gain rail market share and become a major operator. We believe the impending announcement by the regulators on transition details for its rail and bus business model in Singapore is a key event to watch. Reiterate BUY and TP of SGD2.40, based on 18x FY14E P/E.

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