Author: tfwee
ComfortDelgro – DBS
Fuelled by fuel
• Strong operating profit performance (S$94.5m, +82% yoy) in 2Q on lower operating expenses
• Revenue dipped -4% yoy to S$758m; flat if excluding negative translation of GBP/AUD
• Expect strong growth momentum to continue into 3Q
• Maintain Buy, TP raised to S$1.83 equating to 17% upside.
A strong quarter – within expectations. As expected, operating profit registered a strong growth of 82% yoy to S$94.5m, from S$52m, on lower operating costs, largely fuel and electricity costs. This is despite revenue falling 4% to S$758.3m on lower fares and ridership in Singapore, coupled with a weaker GBP and AUD against 2Q08. The negative translation impact of GBP and AUD was S$34.2m; revenue would have been flat excluding that impact. Excluding the exceptional gain in 2Q08 (S$26.5m), net profit would register a growth of 89% to S$57.3m. An interim dividend of 2.63Scents has been declared
Expect to see continued growth in 3Q. We should also continue to see good yoy growth continuing into 3Q09, albeit at a slower rate, on lower operating expenses, particularly fuel costs. The strengthening of GBP and AUD by 14% and 20% since Jan 09 should also bode well for the Group on a sequential basis.
Maintain Buy, TP raised to S$1.83. We raised our forecasts by 2.7% in FY09F and 9.1% in FY10F as we adjust our exchange rate assumptions, coupled with lower operating expenses. We continue to like ComfortDelGro for its diversified geographical presence and its ability to deliver stable growth in these testing times. We raised our TP to S$1.83 as we peg it to a blend of PE and DCF basis (see pg 4, table 2). This equates to an implied PE of 16.8x, 1.7x P/B and EV/EBITDA of 5.7x on our FY10F forecasts, which we believe is not excessive.
ComfortDelgro – DMG
Lower energy costs boosted margins
2Q09 results in-line with expectations. ComfortDelGro registered 2Q09 PATMI of SGD57.3m, up 0.9% YoY (+9.1% QoQ). 1H09 PATMI of S$109.8m was 49.3% of our full year forecast of S$222.8m (consensus S$219.4m). Revenue fell by 4.0% YoY to S$758.3m due to the negative translation effect of the weaker £ and A$. Excluding the translation effect, revenue would have risen by 0.3% to S$792.5m. Operating profit surged 81.7% YoY to S$94.5m due largely to a sharp fall in operating expenses led chiefly by a drop in fuel and electricity costs. Maintain BUY with a DCF-derived target price of S$1.78, based on a 6.9% WACC and 3% terminal growth rate.
Lower energy costs boosted bus earnings. Revenue from the group’s bus operations fell by 3.9% as growth from operations in Australia and China was offset by declines in Singapore and the UK. The temporary fare reduction, increase in transfer rebate and decline in bus ridership (-2.1%) led to a 7.3% decline in Singapore bus revenue. This was, however, offset by lower fuel prices which led to the surge in EBIT from S$3.1m in 2Q08 to S$10.7m.
Weak rail ridership seen in Jan-Jun. In 1H09, ComfortDelGro daily Singapore rail ridership rose 6.6% YoY to 0.36m, slower than 2008’s growth of 15.4%. We are, however, upbeat that ridership figures could be stronger next year on the back of stronger economic and tourism growth. We expect NEL to see stronger ridership when RWS opens its doors in 1Q10.
Underperformed broader market despite healthy earnings. Since March, ComfortDelGro’s stock price rose 22% vis-à-vis the STI’s 76%. We believe the underperformance is unjustifiable given its stable earnings growth. An interim dividend of 2.63¢ was declared, representing a payout ratio of 50%. ComfortDelGro currently trades at 14.6x FY10 P/E multiple which is at the mid range of its 13-17x trading band. At our target price of S$1.78, ComfortDelGro will trade at an FY10 P/E multiple of 16.5x. We, however, prefer SMRT as it remains a key beneficiary to Singapore’s land transport structural growth story.
SingTel – BT
SingTel snaps losing streak, bodes well for economy
Q1 net income up 7.7%; 1st quarterly rise in 12 months
Singapore Telecom has added weight to hopes of economic recovery by posting a rise in quarterly profit for the first time in 12 months.
‘If you look at the economic numbers that have been announced, I think we are probably quite comfortable that the worst is over,’ said SingTel Group CEO Chua Sock Koong.
‘However, the question of how quick the recovery will be and how sustainable it is, is something we are closely monitoring,’ she told reporters at the company’s first-quarter earnings briefing yesterday.
Strong performances in Singapore and Australia, coupled with higher contributions from key regional associates Bharti and Telkomsel, lifted SingTel’s Q1 net income to $945 million, up 7.7 per cent from $878 million a year earlier.
Earnings per share rose 7.6 per cent to 5.94 cents, while operating revenue edged up 1.9 per cent to $3.85 billion for the three months ended June 30.
SingTel, which derives 72 per cent of its Ebitda – earnings before interest, tax, depreciation and amortisation – from overseas, is finally seeing regional currency movements swing in its favour after battling adverse fluctuations for a year.
The Indian rupee narrowed its depreciation against the Sing dollar sequentially to a mere 0.3 per cent in Q1, boosting earnings from Bharti, SingTel’s most profitable regional unit.
Bharti’s contribution to SingTel’s pre-tax earnings climbed 16 per cent to $272 million.
The Indian operator is looking to boost its earnings further through geographic expansion. It has extended merger talks with South Africa’s MTN Group to Aug 31.
A successful union will create a telecom titan with more than 200 million subscribers and over US$20 billion in annual revenue. It could also slash SingTel’s 30.4 per cent stake in its Indian associate to around 19 per cent, but market watchers expect the operator to top up its Bharti stake if this occurs.
‘Discussions are ongoing,’ Ms Chua said, declining further comment on its unit’s merger plan.
SingTel’s Indonesian associate Telkomsel also turned in a strong Q1, with the Indonesian rupiah climbing 7.1 per cent against the Sing dollar during the quarter. As a result, Telkomsel’s share of SingTel’s pre-tax profit rose 11 per cent to $245 million.
After factoring in the scorecards of its four other associates – Thailand’s AIS, Globe in the Philippines, Pakistan’s Warid Telecom and PBTL in Bangladesh – pre-tax profit from SingTel’s six regional units rose 12 per cent to $624 million in Q1.
The group’s Singapore operations registered a 0.3 per cent increase in net income in Q1 to $338 million on a 10.3 per cent improvement in sales to $1.38 billion.
Revenue increased across most key businesses except international telephony, as mobile roaming and IDD income were hit by the economic downturn.
Sales from local IT and engineering spiked almost 50 per cent due to a maiden contribution from SingTel’s latest local acquisition, Singapore Computer Systems.
The operator also netted Q1 revenue of $14 million in Singapore from a fibre-optic rollout contract with OpenNet, a SingTel-linked consortium tasked with building the new broadband highway.
‘We expect that (revenue from installing fibre) to increase as the pace of the rollout starts to peak between 2010 and 2011,’ said SingTel Singapore CEO Allen Lew.
The new nationwide fibre-optic network is expected to be fully operational by end-2012. Besides installing the new fibre-optic links, SingTel will pocket additional income over the coming years by divesting some of its Internet assets to OpenNet.
SingTel’s Australian subsidiary Optus saw a 13.4 per cent jump in net profit in Q1 to A$139 million (S$166.5 million), but its earnings fell 0.8 per cent when converted to Sing-dollar terms due to currency depreciation.
SingTel shares closed unchanged at $3.18 yesterday.
ComfortDelgro – BT
ComfortDelgro Q2 profit up 0.9% to $57.3m
Revenue dips 4% as it takes a hit from weaker pound and Australian dollar
COMFORTDELGRO has reported a marginal 0.9 per cent increase in second-quarter net profit to $57.3 million, supported by an exceptional gain of $26.5 million.
The group registered a 4 per cent dip in revenue to $758.3 million as earnings from foreign operations were hit by a weaker pound and Australian dollar.
Earnings per share rose to 2.74 cents from 2.73 cents a year ago. A dividend of 2.63 cents a share for the quarter will be paid out on Sept 8.
Revenue from bus operations slipped 3.9 per cent to $380.4 million as a result of declines in Singapore and the UK, although operations in Australia and China grew.
Revenue from bus services under SBS Transit dropped 7.4 per cent to $132.5 million as a result of the temporary fare reduction and increase in the transfer rebate – which started in April – as well as a drop in patronage.
Revenue from the taxi business fell 2.8 per cent to $230.7 million from a year earlier, dragged down by operations in the UK.
Revenue from the rail business was up 1.1 per cent to $26.3 million as average daily patronage of the North East Line and the Punggol and Sengkang LRTs grew.
Revenue from bus station business rose 13 per cent to $5.2 million, while revenue from vehicle inspection and testing was 6.5 per cent higher at $19.8 million.
ComfortDelGro group CEO Kua Hong Pak said: ‘Despite the economic downturn, we have achieved growth. While our businesses are fundamentally sound, we remain cautious given the uncertain outlook.’
DMG & Partners maintained a ‘buy’ on Comfort, with a target price of $1.78. Comfort’s stock closed at $1.57 yesterday, down two cents.
Separately, SBS Transit said yesterday that it has invested $159 million in 350 new single and double-decker buses from Sweden’s Scania and Volvo as part of its fleet renewal programme. SBS will have 1,450 new buses in its fleet.
ComfortDelgro – CIMB
Weak sterling and bus ridership
• In line. 2Q09 net profit of S$57.3m (+0.9% yoy) was in line with consensus and our annualised estimates, with 1H09 net profit forming 49-50% of the respective FY09 estimates. Revenue slipped 4.0% yoy to S$758.3m, mainly due to a negative translation effect of S$34.2m from a weak £. Operating costs of S$593.7m fell 11.8% yoy with declines in almost all items except depreciation and repairs and maintenance. 2Q09 pretax margin of 11.9% was better than 2Q08’s 9.8% on lower fuel and energy prices and excellent cost control. Overseas operations contributed 44.3% of revenue, up from 43.8% a year ago. Interim dividend was 2.63 Scts.
• Operational review. Revenue growth was broad-based, with increases coming from the bus business in Australia, China and the UK, taxi and bus station operations in China as well as taxi, vehicle inspection and testing, rail, automotive engineering and driving centre businesses in Singapore. Bus revenue dipped 3.9% yoy to S$380.4m, due to temporary fare reductions and higher transfer rebates in Singapore, lower ridership and the translation effect of a weak ₤ against the S$. However, growth came from rail (+2.5% yoy), bus stations (+13% yoy), automotive engineering (+27.5%) and vehicle inspection (+7.2%). Taxi and diesel sales dropped 2.8% yoy and 26.6% yoy respectively, the latter due to lower fuel prices and sales volumes. EBIT margins improved to 12.5% from 6.3% in 2Q08 on lower overall costs.
• Outlook. Management guided that its performance should be maintained, although Singapore bus operations are expected to be weaker on fare reductions and higher transfer rebates. However, the weaker £ could be a drag on its sizeable UK operations. Management remains cautious in view of the fragile economic climate and would maintain its tight control on costs, receivables and cash flows.
• Maintain Neutral. We maintain our FY09-11 forecasts. With more stable currencies, we have reduced our DCF valuation discount to 10% from 25% (to account for forex risks). We arrive at a new target price of S$1.64 (from S$1.37, WACC 11.2%). CY09 prospective yield is 3.7%.