Author: tfwee
ComfortDelgro – BT
ComfortDelGro’s full-year profit falls 10% to $200m
The land transport firm says operating profit slipped 17% to $278m
HIGHER operating expenses put the brakes on ComfortDelGro’s net profit for the full year ended Dec 31, 2008, causing it to fall 10.3 per cent to $200.1 million, even as revenue grew 3.6 per cent to $3.13 billion.
The land transport giant said operating profit slipped 17.3 per cent to $278 million due mainly to the higher cost of fuel in the first three quarters of the year. For the full year, fuel and electricity costs jumped 31.8 per cent to $285.4 million.
Together with pricier fuel, higher payment for cashless transactions on increased turnover and a rise in taxi driver benefits pushed total operating expenses up 6.2 per cent to $2.85 billion. Earnings per share fell to 9.59 cents from 10.73 cents.
A final one-tier tax-exempt dividend of 2.4 cents per share has been proposed. In addition to the normal interim one-tier tax-exempt dividend of 2.6 cents paid earlier, the total dividend for 2008 would be five cents per share if the final dividend is approved.
ComfortDelGro said the operating profit of its overseas businesses as a proportion of total group operating profit rose to 47.3 per cent in 2008 from 45.8 per cent the year before.
Turnover for its bus business slipped 0.4 per cent to $1.5 billion because of the translation effect of the weaker British pound and Australian dollar.
Still, the UK operations accounted for over 71 per cent of total overseas bus turnover, while Australia made up 23 per cent. China’s share was 6 per cent.
In Singapore, listed unit SBS Transit’s (SBST) net profit for the full year ended Dec 31, 2008 fell 18.9 per cent to $40.58 million, hit by higher fuel and electricity costs, as well as lower interest income on investments. But SBST’s revenue grew 8.9 per cent to $729.6 million due mainly to higher bus and rail fare revenue, along with higher rental income.
ComfortDelGro’s taxi business recorded a 2.5 per cent hike in turnover to $945.3 million. In Singapore, turnover from taxis rose 10.3 per cent to $614.7 million on an increase in fleet size and cashless transactions.
But turnover from its overseas taxi operations fell 9.4 per cent to $330.6 million, mainly due to a 19 per cent decline in UK turnover to $209.3 million from the weaker pound and a drop in demand from corporate accounts. This was partially offset by increases in China and Vietnam.
The rail business chalked up a 15.7 per cent increase in turnover to $101.5 million on higher ridership for the North-east MRT Line and the Punggol and Sengkang LRTs. This is the first time turnover has crossed the $100 million mark.
Listed unit Vicom saw net profit for the full year ended Dec 31, 2008 rise 17 per cent to $15.8 million, thanks to improved volumes from its core businesses of vehicle inspection, and testing and inspection services.
The vehicle inspection unit of ComfortDelGro said total revenue rose 14.1 per cent to $73.8 million on higher revenue, with the significant increase in the testing and inspection services coming from the construction sector, marine and offshore, and oil and gas.
Looking ahead, ComfortDelGro managing director and group CEO Kua Hong Pak said 2009 will be ‘unprecedented and very challenging’. ‘Our focus is on how business trends are developing so as to better position ourselves.’
SMRT – DB
Public transportation ridership set to grow
We raise our earnings by 9.4% and target price to S$2.00
SMRT continues to deliver steady earnings growth and a respectable yield of 5.3%. We expect FY10E earnings growth of 10.4% YoY supported by resilient ridership growth and cost savings from lower oil prices. We have raised our earnings by 9.4% in FY10E to account for our lower oil price assumptions. We raise our TP from S$1.95 to S$2.00 and reiterate our Buy recommendation.
Beneficiary of lower oil price, wage deflation, higher ridership and new rail
SMRT should benefit from: 1) a drop in oil prices, 2) lower staff costs, 3) resilient ridership growth and 4) rental income stability due to long leases. SMRT has also secured a contract to operate the palm monorail in Dubai. This contract is based on a cost plus model and could boost SMRT’s revenue by S$20m pa. Our cost assumptions are conservative and should provide further upside to our earnings.
Increase in rail and bus ridership to offset potential reduction in fares
Public transportation ridership could see stronger growth, underpinned by the reduction in transport fares and an increasing trend of moving towards public transport. We cut our assumptions for fares by 5% in anticipation of the potential fare reduction by the PTC at the end of Feb09. We expect the 5% potential rebate in fares to be more than offset by the increase in ridership for rail and bus.
Target price of S$2.00 implies a PE of 16.8x FY10E; risks
We raise our target price from S$1.95 to S$2.00 on our earnings upgrade and a change in our valuation from ROE/PB to DCF. We have used a COE of 7.5% based on a risk-free rate of 2.6%, ERP of 4.8% and a beta of 1.0 with a TGR of 1%. Downside risks include: a strong rebound in the oil price, decline in ridership, sharp reduction in fares, intense taxi competition and disease outbreak.
StarHub – DBS
Firm guidance reassuring
StarHub’s net profit of S$87m (-11% y-o-y, +10% q-o-q) was slightly better than our S$83m estimate due to lower subscriber acquisition costs. Management guided for (i) 18 cents DPS for FY09 vs our 16 cents expectations, (ii) lowsingle digit revenue growth and 31% service EBITDA margin for FY09, and (iii) capex at less than 11% of sales. We think the 32% margin is a possibility given easing competition. Maintain BUY for stable earnings and 8.9% yield, with a revised target price of S$2.20.
Impact of recession vs easing competition. The impact of recession is already visible in lower roaming fees and usage, which led to lower ARPU for postpaid mobile. Going forward, we might also see a drop in prepaid subscribers. On the other hand, lower subscriber acquisition and retention costs after operators halted aggressive handset subsidies could offset the adverse impact of a recession to a large extent, if not completely.
8.9% dividend yield supported by 11% FCF yield. While FY09F dividend yield looks safe, potentially lower capex from FY10F onwards after StarHub completes its three-year network spending on billing and IT systems in FY09 could lead to higher free cash flow even if earnings do not improve.
Maintain BUY with revised S$2.20 TP. We raised our FY09F and FY10F earnings by 5% each after imputing the recently announced job-credits and corporate tax reduction. Our target price is pegged to 12x FY09F PE, which is a 20% premium to our 10x PE target for M1. The premium is premised on (i) StarHub’s better track record, (ii) no cash tax until FY09F because it has sufficient deferred tax assets, and the resultant 11% free cash flow yield should support the 8.9% dividend yield.
StarHub – OCBC
Guides for Stable FY09 Outlook
4Q08 results within expectations. StarHub reported its 4Q08 results last night, with revenue down 0.4% YoY at S$536.7m, while net profit fell 10.9% to S$87.5m. But we note that the decline was mainly due to a larger tax credit in 4Q07; pre-tax profit was actually up 8.1% YoY at S$99.0m. And on a sequential basis, revenue was up 2.3%, and while it was about 2.3% lower than our forecast, its net profit jumped climbed 10.2%, which was also about 12.5% above our estimate. Again, the main reason for the “outperformance” was due to a lower-than-expected tax rate (11.6% in 4Q08 versus 21.2% in 3Q08). Otherwise, the results were mostly within expectations.
For the full year, revenue rose 5.7% to S$2127.6m, or about 0.7% shy of our forecast, and also below its growth guidance of 7%, while net profit eased 5.7% to S$311.3m, but still 3.2% ahead of our estimate. StarHub also declared a final dividend of S$0.045/share as promised.
Recovery in mobile revenue. On the mobile front, although revenue was down 1.2% YoY at S$272.2m, it was up 3.0% QoQ, which also reverses the previous quarter’s 1.8% QoQ slide. The rebound was due to the 1.2% QoQ growth in pre-paid customers (following two straight quarters of decline), as well as a pick up in pre-paid ARPU from S$22 in 3Q08 to S$25. For its post-paid segment, although net adds grew by 1.6% QoQ and revenue grew by 1.1% QoQ, ARPU slipped further from S$74 in 3Q08 (S$77 in 2Q08) to S$71; management explained that the decline was due to a higher mix of subscribers on data only plans, as well as lower usages of IDD and roaming services. Meanwhile, StarHub was able to reduce its average acquisition cost per user further from S$104 in 3Q08 to S$86.
Guides for low single-digit growth. Going forward, management expects FY09 operating revenue to grow by low single-digit; it also expects to keep service EBITDA margin at around 31%, and keep its capex within 11% of operating revenue. More importantly, based on its projected profitability and cash flow, StarHub intends to continue to pay S$0.045/cent dividend every quarter, totalling S$0.18 for the full year.
Keep BUY with S$2.78 fair value. But given the still uncertain economy climate, we are just bumping up our FY09 estimates marginally (0.9% to 1.5%), and due to the slightly higher capex, our DCF-based fair value eases slightly from S$2.81 to S$2.78. Nevertheless, we continue to believe that StarHub’s business remains resilient and coupled with an attractive 8.9% dividend yield, we maintain our BUY rating.
StarHub – BT
StarHub Q4 net profit drops 11%; full-year revenue hits record
A 17 per cent surge in pay-TV revenue and single- digit sales growth across three other business lines lifted StarHub Ltd to a record full year revenue of $2.128 billion for its fiscal year 2008.
But increased acquisition and retention costs in the first half of the year, as well as higher pay-TV content costs put a drag as full year net income fell 6 per cent to $311 million, from $330 million. Full year earnings per share, on a diluted basis, fell 2 per cent to 18.16 cents, from 18.54 cents.
StarHub yesterday announced the results of its fourth quarter and full year. For the three months ended Dec 31, 2008, sales dipped 0.4 per cent to $537 million, from $539 million in the year-ago period.
Net income fell 11 per cent to $87 million, from $98 million. Earnings per share, on a diluted basis, fell 11 per cent to 5.09 cents, from 5.73 cents.
‘In the fourth quarter, we managed through an increasingly volatile business environment, as the Singapore economy continued to contract – yet we ended the full year with a larger customer base and a relatively strong fourth quarter,’ said StarHub CEO Terry Clontz.
StarHub’s full year sales improved by 6 per cent its previous record of $2.014 billion achieved in 2007. Earnings before interest, taxes, depreciation and amortisation (Ebitda) rose 0.2 per cent to $644 million.
The company is recommending a final dividend of 4.5 cents per share, bringing the total dividends to 18 cents per share for its fiscal year 2008.
StarHub lifted sales across its four key business segments in 2008, led by pay-TV which registered the highest revenue growth at 17 per cent. Mobile, broadband and fixed network revenue grew by four, three and seven percentage points respectively.
Mobile business remained the major revenue contributor at 51 per cent. Pay-TV, broadband, fixed network services and sales of equipment contributed 19, 12, 14 and 5 per cent respectively to the mix.
StarHub also swelled its customer base in key segments. Its mobile customer base grew by less than one per cent to 1,765,000 subscribers at the end of Q4. Pay TV subscribers increased 4 per cent to 524,000; while broadband customers grew 8 per cent to 373,000.
On Monday, rival SingTel announced it grew its mobile phone subscriber base in Singapore by 26 per cent to 2.94 million at the end of 2008, from a year ago.SingTel, which last year scored a coup with its exclusive Apple iPhone deal, is reportedly set to launch the highly-anticipated first version of the Google phone here.
Mr Clontz told BT that StarHub will be focusing on the second-generation of the Google phone instead, and could launch that version before June this year. As for the iPhone, it is ‘still in dialogue with Apple’ but is ‘confident’ of launching it this year.
This year will also see StarHub bidding to become the operating company for Singapore’s next-generation fibre-optic broadband infrastructure.
StarHub last year lost out to a consortium involving SingTel in the first phase of that project. The second-phase winner is expected to be announced by March.
Current Analysis senior analyst Soh Siow Meng said that StarHub, as it plys primarily in the local market, will face challenges posed by competition, expected dip in foreigner population and belt-tightening by businesses and consumers in the coming year. ‘However, there is still room for growth,’ he said.
StarHub shares closed unchanged at $2.02 yesterday.