Author: kktan
ComfortDelgro – Kim Eng
Taxiing to Another Profitable Quarter
Decent 2Q2012 results; Taxis lead again. ComfortDelGro (CDG) reported a NPATMI of SGD65.0m for 2Q2012, an 8.5% increase YoY. Although profits were boosted by a SGD7m increase in Automotive Engineering Services profit, the Taxi business continued to contribute most significantly to the bottom-line (34.7% of operating profit). An interim dividend of SG 2.9 cts was declared, 7.4% higher YoY.
Broad-based revenue growth. CDG’s 2Q2012 financial performance was notable because revenue growth was recorded across almost every business segment. Out of CDG’s core transport segments, Taxi revenue led the way with a 9% increase YoY to ~SGD280m.
Buses a drag, but expectations are low. Of some concern is the Singapore Bus segment, which saw a 65% YoY decrease in operating profit to SGD1.7m, kept afloat with help from advertising and rental revenue. While expectations remain low for the bus business on higher costs, a positive catalyst remains a favourable review of the public transport fare framework by early 2013.
Strength in diversity; Outlook largely positive. 41% of revenue and 45% of operating profit were contributed by CDG’s overseas businesses. Once again, this geographical diversity of the group’s business model allowed CDG to post decent results despite challenges faced by the local public transport operators. Management also guided towards a largely positive revenue outlook, with cost management cited as a key point of focus for the group.
CDG preferred in Land Transport sector, maintain BUY. We roll forward our 16x PER valuation to FY2013 EPS, increasing our Target Price to SGD1.94. We maintain our BUY recommendation based on CDG’s resilient earnings, complemented by its geographically diversified business, both of which support steady, growing dividend payouts. Investors buying in within this week will enjoy the interim dividend declared of SG 2.9 cts, payable on 31 Aug 2012.
SingTel – DBSV
Bharti confirms intense competition
- Bharti’s earnings were 37% below consensus estimate due to intensified competition
- Bharti to remain aggressive in maintaining its revenue share. SingTel’s FY13F/14F trimmed 2%/3%.
- HOLD with lower TP of S$3.25. Near-term cost pressures from mobile advertising in Singapore is another concern
Bharti hurt by rising competition with net profits 37% below expectations. 1Q13 profit of Rs.7.6bn (-37% y-o-y and -34% q-o-q) was 37% below consensus expectations of Rp12.15bn due to a sharp decline in EBITDA margins in India to 31.8% from 35.3% in March 2012, because of rising expenses. High depreciation and finance expenses in Africa had resulted in losses from Africa widening by 120% y-o-y to Rs. 6.7bn.
We had highlighted rising competition in our note on 2 July. Indian operators, including Bharti had lowered tariffs to 0.5 paisa per sec from 1.0 paisa through discount vouchers. At the same time, dealer commissions have also been raised substantially.
SingTel’s earnings trimmed slightly. Bharti is not willing to lose revenue share and intends to remain aggressive in preventing that from happening. We have lowered Bharti’s FY13F/14F earnings by 30% each, implying flat earnings in FY13F (with downside risks). After raising contribution from AIS and Telkomsel slightly, our SingTel’s FY13/14F earnings are trimmed 2%/3% respectively.
Maintain HOLD with slightly lower TP of S$3.25. The key change is lower valuation for Bharti based on the market price of Rs 255 per share. For SingTel, dividend yield of 5% remains the key attraction as growth is not exciting enough.
SingTel – DBSV
Bharti confirms intense competition
- Bharti’s earnings were 37% below consensus estimate due to intensified competition
- Bharti to remain aggressive in maintaining its revenue share. SingTel’s FY13F/14F trimmed 2%/3%.
- HOLD with lower TP of S$3.25. Near-term cost pressures from mobile advertising in Singapore is another concern
Bharti hurt by rising competition with net profits 37% below expectations. 1Q13 profit of Rs.7.6bn (-37% y-o-y and -34% q-o-q) was 37% below consensus expectations of Rp12.15bn due to a sharp decline in EBITDA margins in India to 31.8% from 35.3% in March 2012, because of rising expenses. High depreciation and finance expenses in Africa had resulted in losses from Africa widening by 120% y-o-y to Rs. 6.7bn.
We had highlighted rising competition in our note on 2 July. Indian operators, including Bharti had lowered tariffs to 0.5 paisa per sec from 1.0 paisa through discount vouchers. At the same time, dealer commissions have also been raised substantially.
SingTel’s earnings trimmed slightly. Bharti is not willing to lose revenue share and intends to remain aggressive in preventing that from happening. We have lowered Bharti’s FY13F/14F earnings by 30% each, implying flat earnings in FY13F (with downside risks). After raising contribution from AIS and Telkomsel slightly, our SingTel’s FY13/14F earnings are trimmed 2%/3% respectively.
Maintain HOLD with slightly lower TP of S$3.25. The key change is lower valuation for Bharti based on the market price of Rs 255 per share. For SingTel, dividend yield of 5% remains the key attraction as growth is not exciting enough.
MIIF – DBSV
Yield may not be sustainable
- Declares 2.75Scts dividend for 1H12, guidance for 2H12 maintained at similar level
- Dividends are unlikely to be sustainable at this level in FY13 and beyond, as income from the expressway asset is set to reduce substantially
- Downgrade to HOLD with TP of S$0.58
Write-down in value of expressway asset. MIIF declared 2.75Scts dividend for 1H12, and guided for a similar payout for 2H12, in line with our estimates. The key highlight was a write-down in the valuation of Hua Nan Expressway (HNE) by S$95.7m, as management accounted for the adverse impact of a reduction in toll rates announced in end-May.
Underlying results still robust. In terms of operational performance, Taiwan Broadband Communications continued to see healthy subscriber growth in digital cable TV, and 1H12 EBITDA was up 4.4%, in line with our estimates. Over at Changshu Xinghua Port, revenue growth was driven by log volumes, but higher one-off costs resulted in 8% EBITDA decline. Traffic at HNE grew strongly by 16% in 1H12 owing to positive impact from the opening of Guanghe Expressway, but revenue growth was more muted owing to reduced toll rates from June. Going forward, we expect HNE earnings to decline by 20% in FY12, and 30% in FY13.
Dividends unsustainable at current level. Though our valuations already affect much of the downside in HNE earnings, we revise down our valuation for HNE further to account for potential loss of revenue from a recently proposed regulation which will allow free use of toll roads during major public holidays in China. Hence, our TP is revised down to S$0.58. Downgrade to HOLD, as we believe a reduction in annual dividends from current level of 5.5UScts is inevitable. While DPS of 5Scts could be supported in FY13, dividends in FY14 and onwards could head lower, as the debt amortization profile steps up at HNE, potentially further restricting ability to upstream dividends to MIIF.
MIIF – AmFraser
Results In Line With Expectations
- Results in line with our expectations: MIIF exhibited a strong showing in its 1HFY12 results, with net income up by S$15.2mil to reach S$19.6mil.
- Major overreaction view played out well for us: In an earlier company update, we noted that a sharp decline in MIIF’s share price from ex‐div 57c to 50c on 5 June 2012 was a major overreaction to the estimated impact of the enforced reduction of toll rates from CNY0.75/km to CNY0.60/km on HNE. At that point, we highlighted that this would present an attractive entry point. MIIF is currently trading at 54.5c. Factoring in the impact of lowered tariffs and the opening of Guanghe Expressway, we are presently valuing HNE at S$128.3mil.
- Taiwan Broadband Communications (TBC) records improvement in margins: TBC recorded a 3.7% YoY growth in its overall revenues in 1HFY12 on the back of increases in subscriber numbers across all product segments. More noteworthy is TBC’s improvement in its EBITDA margin, which we believe can be attributed to the robust digital subscription and broadband‐subscription uptake. We believe TBC’s continued initiatives toward ramping up its share of the Digital TV market in Taiwan would pose upside pressure on its margin prospects. TBC raised an additional TWD1.5bil capital expenditure facility to facilitate its push into the Taiwanese Digital TV market and the management believes that initiatives on this front would help increase penetration rates going forward.
- A mixed showing for Changshu Xinghua Port (CXP): Despite clocking in a 6.0% YoY increase in revenue, EBITDA margin fell by 6.7% YoY in 1HFY12. While this was partly a result of a one‐off expense due to the construction of a temporary stacking yard, we believe this can also be linked to the gradual shift of cargo composition towards lower margin products such as logs and paper & pulp. We maintain our margin expectation at 48%.
- Expect 5.0c dividend in FY13F: We maintain our view that a 5.0c dividend would be a sustainable level for MIIF going forward given its existing large cash balance. A reduction in dividend to 5.0c would still present an attractive yield of 8‐9%.
- A tantalizing 10% yield: MIIF has declared a 2.75c dividend in the half‐year ending June 2012 and has guided for a 2.75c dividend in the second half. This translates into a very enticing yield of 10.2%. Our fair value now stands at S$0.655, which means that MIIF offers capital gains potential of 20%. This, coupled with a 10% yield, makes MIIF an attractive play in the current market climate. BUY.