Author: tfwee
ComfortDelgro – BT
ComfortDelGro Q3 profit up 15% to $59m
Bus, taxi operations in UK and Australia the star performers
COMFORTDELGRO’S net profit for the third quarter ended Sept 30 rose 15 per cent to $59 million compared with the corresponding period last year, with its overseas ventures turning in a strong performance.
The land transport giant said its bus and taxi operations in the UK and Australia were the star performers. Q3 revenue rose 6.3 per cent to $771.4 million, while operating profit increased 14.4 per cent to $93 million. Overseas operating profit now accounted for 52 per cent of total group operating profit.
‘For the first time, more than half of our group operating profits came from overseas,’ said ComfortDelGro managing director and group CEO Kua Hong Pak.
‘In fact, practically all our overseas businesses improved in their performance – particularly our Australian subsidiary which more than doubled its operating profit.’
The strength of the overseas contributions meant that overseas turnover accounted for nearly 48 per cent of total group revenue – up from 44 per cent a year ago and 47 per cent in the previous quarter. As a result, the group is close to achieving its long-stated goal of deriving half of its total revenue from abroad, a target set four years ago following the merger of Comfort and DelGro.
The group’s Q3 turnover from the bus business rose 10.6 per cent to $401.3 million due to higher contributions from its UK, Australia and China operations. In Singapore, turnover at SBS Transit grew 3 per cent as daily ridership increased, but operating profit was 44 per cent lower on higher repair and maintenance, depreciation and staff costs, as well as the GST hike.
The turnover for the group’s taxi business in Q3 was up 6 per cent to $230.7 million. In Singapore, turnover for the taxi business was 5.3 per cent higher at $141.4 million due to a younger operating fleet and an increase in corporate billings. Turnover from overseas taxi operations grew by 7.2 per cent in Q3, led by the UK and China.
The Q3 turnover for the rail business jumped 20 per cent to $22.8 million as average daily ridership on the North-east MRT Line grew steadily. But total operating expenses in Q3 crept up 5.3 per cent to $678.4 million, as staff costs increased 10.4 per cent to $242.2 million, payment for contract services spiked up 18.3 per cent to $65.8 million, energy and fuel costs rose 5.2 per cent to $57.1 million and repair and maintenance jumped 14.6 per cent to $45.6 million, among others.
For the first nine months, the group’s net profit was 12 per cent higher at $172.9 million, as revenue rose 7.8 per cent to $2.23 billion. Earnings per share in Q3 rose 14.5 per cent from 2.48 cents to 2.84 cents, while year-to-date earnings per share were up 11.7 per cent from 7.46 cents to 8.33 cents. No dividend has been recommended.
Looking ahead, Mr Kua said the group’s overseas operations will continue to drive revenue and profit growth. But depreciation expense is expected to increase with the introduction of new buses in Singapore. Repair and maintenance costs are also seen to increase, while energy and fuel prices are likely to remain high and volatile.
ComfortDelgro – UOBKH
3Q07 operating profit driven by taxi operations
CD reported 3Q07 net profit of S$59m, up 15% yoy. This was driven by a 28% yoy surge in taxi operating profit.
UK and Australia bus operations were star performers. Turnover expanded 6% yoy to S$761m, on the back of strong contributions from overseas operations. The Group’s bus operations in the UK and Australia were the star performers, accounting for over 70% of the increase. UK bus business recorded a 12% yoy turnover expansion, due to higher quality incentive payments, contract rate adjustments and increased mileages operated at Metroline. Australia bus turnover jumped 45% yoy, with contributions from Toronto Bus Services which was acquired in Jul 07. Overseas operations accounted for 48% share of turnover, up from 3Q06’s 44% – close to CD’s mid-term target of 50% share of turnover from overseas. UK bus operating profit of S$23.9m was S$6.5m higher yoy, mainly due to write-back of provisions. Australia bus operating profit was 118% higher yoy.
Singapore bus operating profit fell sharply. SBST turnover was up 3% yoy mainly due to a 4% increase in average daily bus ridership to 2.24m rides and an increase in advertisement revenue. However, operating profit of S$8.1m was sharply lower than 3Q06’s S$14.4m due to higher repair and maintenance and depreciation costs.
Operating profit was up 14.4% or S$11.7m yoy to S$93m. Besides contributions from UK and Australia bus businesses, the taxi business was another key contributor, recording operating profit of S$34.4m, which is S$7.6m higher yoy. This was due to higher turnover, lower benefits paid to taxi drivers and lower depreciation.
CD continued to generate good operating cashflow. 9M07 operating cashflow of S$232.6m amounts to an annualised 15¢ per share. We believe CD’s ability to keep its operating cashflow at a high level is a positive, especially with respect to its ability to pay out more dividends.
BUY CD. Our target price of S$2.91 comprises a) S$2.70 value based on current land-transport ownership structure, which factors in a DCF valuation of the Singapore bus, rail and advertising operations (using 2.5% terminal growth rate and WACC of 6.9%) and PE valuation for the other businesses; and b) S$0.21 based on the assumption of restructuring of the Singapore land transport system to one-operator running all rail and bus services.
ComfortDelgro – CIMB
A walk in the park
• Within expectations. 3Q07 net profit of S$59.0m (+15% yoy) was within consensus and our expectations, with revenue growth driven by all its business segments, especially its overseas operations in the UK, China and Australia. 9M07 net profit was S$172.9m, up 12.0% yoy and was 73% of our FY07 forecast.
• Operating expenses in 3Q07 were S$678.4m, up 5.3% yoy, attributable to higher staff costs, contract services, repair & maintenance, vehicle leasing charges and insurance & accident compensation. Materials & consumables declined 15% yoy to S$60.8m while taxi drivers’ benefits fell 29.1% to S$16.6m. Energy costs rose modestly by 5.2% yoy to S$57.1m, aided mainly by fuel hedging. Operating profit grew 14.4% yoy to S$93.0m on the back of good financial management.
• Bus segment continues to be boosted by overseas operations, turning in revenue growth of 10.6% yoy to S$401.3m in 3Q. Operating profit rose 12.6% yoy to S$41.0m, on writeback of provisions in the UK operations, and improved rates, increased charters and maiden contributions from recently acquired Toronto Bus Services. Singapore bus operations posted lower operating profit of S$8.1m due to higher repair & maintenance, depreciation, staff costs and higher GST. Turnover and operating-profit mix from overseas bus operations was 62.7% and 80.2% of group bus operations, respectively.
• Taxi revenue grew 6.0% yoy to S$230.7m, mainly from Singapore and UK. However, operating profit was higher by 28.4% yoy to S$34.4m, on higher rental rates in Singapore and China, and maiden contributions from newly acquired Flightlink and Computer Cab.
• Rail operations continued to support growth momentum, with an operating profit of S$2.3m, up from S$0.3m in 3QFY06, supported by higher average daily ridership for the North-East Line and Punggol and Sengkang LRT lines.
• Other segments. Driving school and vehicle inspection and testing operations continued to post good revenue growth of 15.3% yoy, while automotive engineering, diesel sales and car rental operations remained relatively stable.
• Maintain Outperform and target price of S$2.38. On our unchanged DCF valuation (WACC 8.0%, terminal growth 1%), our target price remains S$2.38. The stock should be well-supported by its attractive dividend yield of over 5%.
SPAusNet – BT
SP AusNet plans to raise A$3.02b in share sale
Proceeds will fund purchase of assets from parent
SP AusNet, the Melbourne- based power distributor 51 per cent owned by Singapore Power Ltd, plans to raise A$3.02 billion (S$4.08 billion) by selling shares to help fund the purchase of Australian assets from its parent.
The price of the new shares will be no less than A$1.1 apiece and details of the sale will be announced later, SP AusNet said in a statement to shareholders yesterday.
The utility will borrow A$4.33 billion to contribute to the cost of acquiring the assets, formerly owned by Alinta Ltd.
The A$8.32 billion transaction will make SP AusNet Australia’s largest energy transmission company.
Parent Singapore Power bought the assets from Alinta in August, including Alinta’s energy distribution networks and pipelines in New South Wales, Victoria and Queensland.
‘The transaction is expected to be distributions accretive and have a positive impact for securityholders,’ SP AusNet chairman Ng Kee Choe said in a separate statement.
It ‘provides access to new capabilities and enhanced opportunities for growth through asset expansion, increased energy demand and the provision of asset management services’.
The power distributor’s shares fell 0.4 per cent to A$1.245 by 2.43 pm in Sydney, trailing the 0.1 per cent drop in the exchange’s benchmark utilities index.
The balance of the funds needed for the acquisition will come from the assumption of Alinta debt and hedge liabilities, it said.
Dividend payments will increase by an estimated 2.5 per cent in 2009, SP AusNet said.
Shareholders are scheduled to vote on the transaction on Dec 11 and the transaction is expected to be completed by Dec 21.
SP AusNet’s credit rating will be cut should shareholders approve the transaction and the equity raising proceed to ‘A-‘ from ‘A,’ Standard & Poor’s Ratings Services said yesterday. SP AusNet remains on ‘CreditWatch’ with negative implications.
‘Although SP AusNet will benefit from business, geographic, and regulatory diversity, the group’s cash-flow metrics will deteriorate substantially because of the proposed high debt levels,’ Standard & Poor’s analyst Parvathy Iyer said.
Morgan Stanley Australia Securities Ltd, Goldman Sachs JBWere Pty Ltd and UBS AG are the proposed underwriters of the share sale, SP AusNet said. — Bloomberg
MIIF – BT
Why MIIF decided against rights issue
Shareholders raise concern about European asset sale
MACQUARIE International Infrastructure Fund (MIIF) did consider a rights issue to pay for its Asian assets instead of selling its European assets, the fund’s chairman John Roberts said yesterday.
But it decided a rights issue was not in the best interest of the fund or its shareholders, he told shareholders concerned by the fund’s switching from stable mature infrastructure holdings to buying assets in Asia’s high-growth but more volatile economies.
About 120 MIIF shareholders turned up yesterday at a special meeting to vote on a proposal to sell the fund’s 3.2 per cent interest in Brussels Airport and a 100 per cent interest in German oil tank storage business TanQuid.
Shareholders also voted on a proposal to receive their dividends in scrip.
The proceeds from the European sales will help finance the purchase of an 81 per cent stake in Hua Nan Expressway in Guangdong, China for about four billion yuan (S$778.7 million), MIIF’s first toll road investment in the world’s fastest-growing major economy.
One shareholder cautioned about investing in Guangdong given his own personal ‘difficult’ experience.
Another shareholder wondered if MIIF could have raised funds from the market through a rights issue instead of selling its stake in Brussels Airport.
Others asked about the pricing of the assets to be divested, given no tender was called and the buyers are Macquarie-related entities. They also noted that the two assets to be sold have given high returns of 9.2 per cent and 16 per cent.
Mr Roberts said that the returns from Hua Nan will be very strong, that he is confident MIIF will maintain and grow distributions consistently and that the acquisition is expected to be value-accretive.
He said the prices of the businesses to be sold exceed their book value and will contribute to a healthy internal rate of return.
The board did consider going to the market to raise funds for its Asian investment strategy, but decided this was not the time to do so, he said.
‘We felt that if we were to embark on public capital raising, when you included the costs of underwriting fees, issuing prospectuses, and a discount to the current market in order to attract the capital, that it was likely we would be issuing shares that would be probably closed to $1 type of price,’ he told shareholders. ‘We would be more comfortable seeing the share price appreciate a bit higher before we come back to the market.’
The board is ‘very protective of the share price’, he said.
MIIF was listed in May 2005 at $1 a share, which raised $800 million. A secondary exercise six months later in November at 96 cents a share brought in another $435 million.
The stock closed four cents lower at $1.04 yesterday.
Including this week’s purchase of Hua Nan Expressway, Asian assets now make up 35.8 per cent of MIIF’s portfolio, versus zero when it listed in 2005.
Mr Roberts assured shareholders that Hua Nan has a track record of paying distributions to shareholders since it was opened in 1999.
Use of the expressway has grown 13.7 per cent a year and currently some 37,000 cars use it, said Gavin Kerr, managing director of MIIF’s manager.
Shareholders passed all resolutions yesterday.