Month: June 2010
ComfortDelgro – Phillip
Ridership update
• Bus ridership for April showed a slight growth of 3.4% y-y
• Rail ridership continues to grow strongly in April, 14.8% y-y
• Maintain Buy recommendation with a fair value estimate of S$1.73
Both bus and rail riderships grew in April
Both the bus and rail riderships grew in April by 3.4% and 14.8% y-y respectively; bus ridership saw a modest growth despite the opening of circle line. We believe that more Singaporeans are switching over to the public transport due to the increased connectivity and shorter travelling time during the morning peak hours,which bodes well for the 2 transport operators in Singapore.
Valuation and Recommendation
We are maintaining our Buy recommendation and fair value estimate of S$1.73, we believe that the UK’s business will turn in a better result for 2010 and Australia’s business will continue to show strong growth. The recent price correction of CDG has provided investors with a good opportunity to accumulate the stock.
SPH – CIMB
It’s different this time
• Maintain Outperform. We have lowered our FY10-12 earnings estimates by 1-4% after factoring in a slower recovery in ad revenue because of a potential slowdown in Europe. Our sum-of-the-parts target price accordingly dips to S$4.43 from S$4.50. Nevertheless, maintain Outperform as SPH’s future earnings should be bolstered by a recovery in ad revenue, in line with Singapore’s improving economy, which we believe, will be held up by resilient Asian economies. We expect stock catalysts from better-than-expected ad demand and lower-than-expected newsprint costs.
• Earnings risks mitigated by still-moderate newsprint prices. In 2008-09, SPH’s ad revenue was down 17% yoy. We expect a 5% recovery in ad revenue over 2010-11 from a low base a year ago. furthermore, newsprint prices are unlikely to hit the 2008 peak of US$700/MT because of an expected economic slowdown in the US and Europe. Also, SPH should benefit from US$ weakness as it print-ad revenue is booked in S$ but newsprint is paid in US$. Overall, with a lower cost base, we believe the impact of a potential slowdown on SPH’s earnings will be less muted than in previous recessions.
• Defensive, with high dividend yields. For investors looking for defensive names, we recommend SPH for its: 1) near-monopoly of the print-ad industry in Singapore, making it a beneficiary of a domestic economic recovery; 2) print business which is well-positioned to benefit from a raft of events planned for Asia over the next few years; and 3) dividend yields of 6-7%, comparable to average S-REIT yields and higher than the yields of other large caps.