Author: tfwee
ComfortDelgro – Phillip
3rd Quarter Results
ComfortDelGro Corp recently announced their third quarter results for the financial year 2009 (“3QFY09”). Group revenue declined 3.7% from $812.6m for 3Q08 to $782.6m for 3Q09. The decrease of $30.0m was due to a negative foreign currency translation effect of $24.4m and a decrease in revenue of $5.6m.
Group operating expenses declined $43.0m or 5.9%, from $734.7m for 3Q08 to $691.7m for 3Q09. This decrease of $43.0m was mainly due to a positive foreign currency translation effect of $21.9m and a decrease in operating expenses of $21.1m. The decrease in operating expenses was due mainly to lower cost of diesel for resale, lower fuel and electricity costs, lower payments to drivers for contract services and the Jobs Credit in Singapore offset by higher staff costs, increase in purchases of vehicles for sale and higher depreciation.
Group operating profit was 16.7% higher than that for 3Q08, increasing from $77.9m to $90.0m for 3Q09. Group profit attributable to Shareholders of the Company was $7.3m or 15.1% higher, increasing from $48.3m in 3Q08 to $55.6m in 3Q09.
Bus revenue segment. At Group level, the third quarter bus business declined by 0.6% to $400.9m as growth in bus operations in Australia and China was offset by declines in Singapore and the UK. For the Group’s Australian business, ComfortDelGro Cabcharge Pty Ltd saw revenue jump by 40.6% to $76.9m boosted by contributions from the new operations in Victoria.
The China operations in Shenyang continued to experience strong ridership growth resulting in bus revenue to grow 10.0% to $15.4m for 3Q09.
Revenue from scheduled bus services under SBS Transit fell by 9.6% to $136.3m for the quarter due to the temporary fare reduction, increase in the transfer rebate and a drop in ridership by 2.9%.
The bus business in UK was 6.3% lower at $158.3m due to the weakening Sterling Pound. If the impact of the foreign currency was removed, revenue would have actually increased by 5.9%.
Taxi revenue segment. At Group level, third quarter revenue for the taxi business fell by 4.0% to $229.8m compared to the same period last year as revenue increases in Singapore and China were more than offset by declines in the UK and Vietnam.
Singapore’s taxi business increased by 2.0% to $159.4m due mainly to a higher volume of cashless transactions and a larger operating fleet.
China’s taxi operations increased by 4.6% to $32.0m due to increases in fleet sizes. The recent acquisition of Beijing Jia Run Taxi Co. Ltd and increases in the number of taxi licenses in Jilin City, Nanjing, Nanning and Shanghai also helped boost revenue for the quarter.
The UK’s taxi business fell by 26.5% to $36.9m due to a decline in corporate bookings and the negative translation effect of the weaker Sterling Pound. In Vietnam, revenue from the taxi business fell by 31.8% to $1.5m due to a drop in operating fleet.
Rail revenue segment. The rail operations saw a rise in revenue by 0.7% to $27.4m due to continued ridership growth. Average daily ridership for the North East Line grew by 3.9% to 328,000 while the Punggol and Sengkang LRTs increased by 3.1% to 47,000.
Bus Station revenue segment. Revenue from the bus station business under Guangzhou Xin Tian Wei increased by 3.9% to $5.3m due to an increase in the number of bus trips operated.
Vehicle Inspection and Testing revenue segment. Vehicle inspecting and testing operations increased by 0.5% to $19.9m due mainly to growth in the non-vehicle testing business under Setsco Services Pte Ltd.
Upgrade to BUY with an adjusted fair value estimate of S$1.78. Given the lower fuel & electricity costs as well as the decline in the cost of materials and consumables, we have adjusted our operating expenses downwards, leading to a stronger operating profit for our forecasted figures, arriving at an increased fair value of S$1.78. As this represents an upside potential of 16.3% from the last done price of
$1.53, we are upgrading to a BUY based on our stock selection system.
SPH – BT
SPH explains thinking behind mall bid
Winning bidders looking ahead at rentals upon lease renewal
Even as the Housing & Development Board yesterday awarded Clementi Mall to a Singapore Press Holdings-led consortium, members of SPH’s top management sought to explain the rationale for the bid price, which stockbroking analysts and market watchers have said was too high.
The consortium members are taking a long-term position on the investment and looking at forward rentals at the next lease renewal cycle – instead of just immediate returns when the mall begins operating in the first half of 2011, SPH’s management said at media and analyst briefings yesterday.
It also revealed that more than 300 interested parties have registered interest to potentially rent space at the mall.
And the projected fit-out cost will be under $40 million – lower than the $40-50 million that some analysts had assumed.
HDB is building only the mall’s core structure and facade, which it is scheduled to hand over in August next year to the joint venture, which will then finish the project and have naming rights for the property.
NTUC FairPrice, which has a 20 per cent stake in the venture, will lease 20,000-25,000 square feet for a supermarket at basement one of the mall. It may also take up additional space for a convenience store.
NTUC Income, which also has a 20 per cent stake, and SPH, the majority shareholder with 60 per cent, may also take up space in the property. The latter is likely to be for a kiosk selling newspapers and magazines.
Clementi Mall – the working name for the 99-year leasehold property – will have an air-conditioned bus interchange on the first level. The mall’s third level will be linked to Clementi MRT Station.
SPH’s management yesterday explained that the venture’s bid valuation was based on stabilised operations after the mall’s rental renewal cycle, and enhancing yield over time.
‘In other words, when we do our calculations, we are not using the rentals when we start operations. We are actually using after rental renewal cycle, whether it is after three years or six years,’ said SPH chief executive officer Alan Chan.
Had SPH used the typical strategy of real estate investment trusts (Reits), which assume say a 5-6 per cent return based on rents when the mall starts operating, it would have led to bids in the $300 million range – where four of the six bids came in for the mall at the close of HDB’s tender last Tuesday.
‘When you are a Reit, you have to ensure immediate returns. Whereas we are long-term players and we are prepared to place our bets based on forward rentals at the next cycle,’ Mr Chan said.
‘This is the challenge the bidder is always confronted with: Do you use standard metrics or do you think out of the box?’
The venture hopes to achieve the rentals that are obtained by the best suburban malls in Singapore.
Its winning bid of $541.898 million was the highest of six offers that HDB received for the mall. The winning bid is nearly 42 per cent more than the next highest offer of $382 million.
Earlier, analysts had forecast a valuation for the property – comprising the bid price as well as assuming fit-out costs of $40-50 million – of about $3,000 per square foot of net floor area of retail space.
But SPH management yesterday said that the projected fit-out costs would be under $40 million and hence the valuation would be ‘somewhere south of $3,000 psf’.
Along prime Orchard Road, ION Orchard was valued at $3,747 psf of net lettable area as at June 30 this year.
SPH said that it also worked in prospects for potential capital appreciation in the bid price, pointing to its successful track record with Paragon along Orchard Road.
Its valuation has increased from just under $800 million in 1997 to almost $2 billion today. Based on the current market price,
Paragon’s yield is well above 4 per cent. The return on equity is above 10 per cent – a result that was achieved over the years, not overnight.
Mr Chan also sought to allay concerns in some quarters that SPH’s investment in Clementi Mall could clip dividend payouts to shareholders.
Firstly, SPH’s stake in the venture is only 60 per cent – and for which it has enough internal funds to pay, with the rest to be funded through borrowings.
‘Secondly, our dividend track record is always a function of recurring earnings. So this investment is not going to affect the dividend track record.’
And when stabilised rental income starts streaming in from Clementi Mall, SPH’s recurring earnings will increase, he added.
ComfortDelgro – DBS
Stable yoy growth continuing from 2Q
At a Glance
• 3Q09 net profit + 15% yoy; within expectations
• Revenue impacted by FX translation but operating profit grew 17% yoy largely on lower oil prices;
• Steady group operations with diversification helping to balance soft spots (UK taxi, Singapore bus)
• Retain Buy; TP: S$1.83.
Comment on Results
3Q09 net profit within expectations. 3Q09 net profit at S$55.6m (+15.1% yoy, -3% qoq) on the back of a topline of S$782.6m (-3.7% yoy). The drop in revenue was largely a result of negative FX translation effect (-$24.4m) and lower diesel sales. 9M net profit now accounts for c.76% of our full year estimates.
Operating margins improved on lower costs. 3Q EBIT margins improved to 11.6%, from 9.7% a year ago, largely on lower oil prices, lower payment for contract services and Jobs Credit, offset partially by higher staff costs, and other depreciation.
Balance sheet remains strong with a net gearing of 3.4%, from net cash position in Dec 08, due to payment for the acquisition of Kefford in Victoria, Australia.
Recommendation
DTL bid likely in mid 2010. While details are not firmed up and discussions are still at a preliminary stage with the Land Transport Authority, management believes the bidding for Downtown Line (DTL) could be sometime around mid 2010.
Hedged partially on fuel needs till 1Q10. Management indicated that they have hedged c.50% of their fuel needs till 1Q10, and are looking to hedge further into 2010.
Maintain Buy, TP: S$1.83. We continue to like ComfortDelGro for its diversified geographical representation. We see steady growth for the Group going forward, with challenges in certain areas (eg buses in Singapore, taxis in UK) balanced by potential growth in other areas (rail, taxis in China, buses in Australia). The strengthening of AUD is positive for its growing presence there. Maintain Buy, TP: S$1.83 based on a blend of 15x PE and DCF (WACC 9.5%).
StarHub, SingTel – BT
StarHub stirs up the storm over set-top box
It hits back at SingTel and refutes technology claims
A small set-top box has managed to open up a Pandora’s Box in the local pay-TV sector, as the question of whose hardware to use turns into an open spat between Singapore’s big two.
In the latest development, StarHub yesterday refuted SingTel’s assertion that the green camp’s cable television customers will have to upgrade their set-top boxes when Singapore’s nationwide fibre-optic network starts to kick in from the first quarter of 2010.
‘StarHub would like to make it clear that we completely disagree with any claims about technological reasons for not accepting our recent proposal (to carry some of each other’s programming to get around the need for two set-top boxes),’ StarHub said in a statement.
‘And it is not true that StarHub TV customers must upgrade their set-top box next year for the NGNBN (Next-Generation National Broadband Network),’ the statement added.
On Wednesday, SingTel Singapore CEO Allen Lew said StarHub’s current cable TV box is not compatible with the new broadband highway and consumers should bear this in mind when assessing StarHub’s shared-programming idea to get around the hassle of having two set-top boxes.
StarHub’s rebuttal came a day after it officially tabled an offer to SingTel to carry the latter’s English Premier League and ESPN Star Sports content. From mid-next year, these will be shown over SingTel’s mio TV platform after Singapore’s largest telco clinched the broadcast rights for the programmes last month.
StarHub is touting its shared-programming offer as an interim solution to resolve the double set-top box issue while the government looks into the longer-term possibility of hardware standardisation.
Mr Lew also said on Wednesday that SingTel needs to ‘amortise’ the investment it has sunk into rolling out its own pay-TV infrastructure and that StarHub’s offer came ‘three years too late’.
StarHub said yesterday: ‘References to what could have been proposed three years ago have no relevance. We could say the same about a number of things in the telco space that our competitors could have done over the past 10 years that would have made the playing field more level.
‘The sub-agenda for each of us is transparent. Each operator would like to have its set-top box as the preferred box in the home. That is one reason why StarHub is making the proposal, and the only reason why our competitor would not accept it.’
ComfortDelgro – BT
ComfortDelGro’s Q3 profit up 15%
LOWER energy costs helped ComfortDelGro to post a 15.1 per cent rise in net profit to $55.6 million for the third quarter ended Sept 30, 2009.
But Q3 revenue for the world’s second largest land transport group slipped 3.7 per cent to $782.6 million, mostly because of the negative translation effect of the weaker British pound and Australian dollar.
Third-quarter operating profit had climbed 16.7 per cent to $90.9 million, due mainly to lower operating expenses as a result of a drop in fuel and electricity costs. The transport giant said that without the negative foreign currency translation effect, operating profit would have been 20 per cent higher at $93.4 million.
Q3 overseas operating profit accounted for 44 per cent of total group operating profit, from 49 per cent in the same quarter a year ago. Particularly outstanding was the overseas bus business, which continued to outpace the local operations, accounting for 78.2 per cent of group bus operating profit of $31.7 million.
Overseas operations accounted for 44.5 per cent of group revenue for Q3, up from 42.5 per cent previously.
The group said that its key businesses grew. Revenue growth was broad- based in both geographical and segmental terms.
But overall revenue was slowed down by lower diesel sales to taxi drivers, which totalled $49.1 million or $24.4 million less than the $73.5 million in the previous corresponding quarter as selling prices and volumes sold fell. The lower cost of diesel, however, resulted in a Q3 operating profit of $6.2 million compared with a loss of $0.2 million previously.
The group’s taxi business posted Q3 operating profit of $27.7 million, or $0.9 million lower than last year’s Q3, due to lower profit from the UK and Vietnam taxi businesses, although this was compensated by higher profit from the Singapore taxi business.
The local taxi business had recorded a Q3 operating profit of $16.3 million, or $1.1 million better than previously. This was on the back of a $3.1 million increase in revenue to $159.4 million, thanks to a higher volume of cashless transactions and a higher operating fleet.
Q3 earnings per share came to 2.66 cents, up from 2.32 cents previously. Net asset value per share totalled 78.9 cents, up from 74.65 cents nine months ago. No dividend has been recommended.
For the first three quarters, net profit was 6.5 per cent higher at $165.4 million compared with the same period a year ago. But year-to-date revenue was 4 per cent lower at $2.26 billion, although earnings per share came to 7.92 cents, up from 7.45 cents previously.
ComfortDelGro managing director and group CEO Kua Hong Pak said that the first nine months of 2009 were not easy but the company stayed focused and built on its strengths.
However, Mr Kua added: ‘The economic outlook remains uncertain despite signs of recovery, so we will have to continue to be vigilant.’