ComfortDelGro’s Q4 profit up 3.5%

Full-year net up 3.1% at $235.6m; rise driven mainly by taxi, rail businesses

COMFORTDELGRO’S net profit for the 2011 fourth quarter climbed 3.5 per cent to $56.5 million, from $54.6 million a year earlier.

The rise in profit attributable to shareholders came on the back of a 7.2 per cent year-on-year rise in group revenue to $887.2 million.

Total operating expenses for the quarter increased 7.7 per cent to $791.5 million, contributed in part by a 20.2 per cent year-on-year surge in fuel and electricity costs to $73.9 million. The quarter saw taxi drivers’ benefits dropping 14.2 per cent to $19.3 million.

For the full year ended Dec 31, 2011, net profit rose 3.1 per cent to $235.6 million, with the increase driven mainly by its taxi and rail businesses.

Full-year revenue climbed 6.4 per cent to a record $3.41 billion, with the land transport giant attributing growth from all business segments. Revenue could have been higher if not for the negative foreign currency effect of $16.0 million.

Group operating expenses for the 12 months rose 6.9 per cent to $3.01 billion on increases in materials and consumables, fuel and electricity costs, staff costs and depreciation, among others, although these were mitigated by a positive foreign currency translation effect of $20.2 million. For example, materials and consumables jumped 23.8 per cent to $336.4 million, while fuel and electricity costs surged 20.7 per cent to $283.3 million. Staff costs, the group’s biggest cost component, rose 5.0 per cent to $1.04 billion. Taxi drivers’ benefits fell 14.3 per cent to $66.7 per cent.

Operating profit was 2.8 per cent higher at $399.2 million.

ComfortDelGro said that overseas operating profit accounted for 45.8 per cent of group operating profit, while overseas revenue made up 42.2 per cent of group revenue. Its global fleet size of buses, taxis and rental vehicles has also increased to a record of some 46,300 vehicles.

Full year earnings per share rose to 11.26 cents from 10.95 cents, while the group’s net asset value was 90.46 cents as at Dec 31, 2011, up from 86.20 cents 12 months earlier.

A final dividend of 3.30 cents per share has been proposed.

As its biggest business segment, buses brought in revenue of $1.69 billion for the group in 2011, or up 4.5 per cent. Operating profit slipped 2.8 per cent to $145.0 million due mainly to decreases in SBS Transit and the China bus business but was offset by an increase in the Australian bus business. The operating profit of the overseas bus business continued to outstrip that of the Singapore bus business and accounted for 85.8 per cent of group bus operating profit.

The group’s taxi business chalked up revenue of $1.039 billion or a 5.8 per cent hike, with taxi revenue crossing the $1 billion mark for the first time thanks to a larger global fleet. Operating profit rose 8.6 per cent to $129.6 million. In Singapore, revenue from the local taxi business climbed 7.6 per cent to $748.7 million due to an increase in replacement taxis, a larger fleet, and a higher volume of cashless transactions. Operating profit was 9.7 per cent higher at $83.8 million.

Revenue from the rail business grew 10.5 per cent to $134.4 million due to an increase in average daily ridership and in spite of lower average fares, with operating profit rising 8.2 per cent to $27.7 million.

Also showing an improvement in operating profit was the vehicle inspection and testing business. Revenue rose 8.7 per cent to $93.5 million, with operating profit rising 12.5 per cent to $30.7 million as more cars were inspected and higher sales were achieved by Setsco Services.

Looking ahead, ComfortDelGro sees bus and rail ridership increasing at a slower rate because of the expected economic slowdown. It expects revenue from the UK bus business to continue being affected by the currency translation effect of the weaker pound sterling. But improvements are likely from the Australian bus business, and the taxi businesses in Singapore, China and Australia.

ComfortDelGro shares closed trading yesterday at $1.48, up half a cent.

Profit boost for ComfortDelGro unlikely: analysts

Fare hikes not likely to see immediate cab rental revision, they say

COMFORTDELGRO will not benefit from its latest taxi fare revision in terms of earnings, say analysts. But some reckon that, further down the road, the new fare structure will give the land transport operator more leeway to adjust cab rentals.

Some analysts yesterday kept their earnings expectations for ComfortDelGro unchanged, even though taxi passengers are widely expected to pay more overall from the mix of reductions and increases in the new fare structure that takes effect from Monday.

‘This is only a fare revision which will affect taxi passengers’ travelling costs and hirers’ income. We don’t expect an immediate change to hire-out rates and lease-out rates so we keep our earnings estimates for now,’ DBS Group Research said in a report yesterday. It maintained a ‘buy’ call on the stock with a target price of $1.95.

Kim Eng Research also sees ‘no direct impact on the operator’s profitability’. Its check with ComfortDelGro’s management ‘suggests that there is currently no intention to raise its cab rental charges in the near term’, it said in a note yesterday.

Some analysts, however, believe that the increase in cabbies’ earnings will give ComfortDelGro more leeway later on to raise average rental rates.

‘Based on our assumption that a taxi driver can earn about $10 more a day following the fare revision, and assuming (ComfortDelGro) increases its rental fees by 20 per cent of the drivers’ increased profits, (ComfortDelGro) would be able to increase its average rental rates by about 2 per cent, which will translate to a 4 per cent increase in its FY2013 (profit after tax and minority interests),’ Joshua Low of DMG & Partners Research said in a report yesterday.

‘Though (ComfortDelGro) has not commented on increasing its taxi rental rates, we see the possibility of this happening once commuters become more accustomed to the new fare structure.’

Mr Low expects taxi passengers’ fare to increase by 10 per cent. Likewise, AmFraser Research, which did its own sums, said in a note that distance-based fares will be 5.5 per cent higher and ‘coupled with higher flagdown rates, overall cost to commuters will be at least 10 per cent more’.

ComfortDelGro is raising the flagdown rate by 20 cents for most of its taxi fleet. The peak period surcharge, while lower in percentage terms, has been extended to cover all of nightfall, from 6pm to midnight, seven days a week and on public holidays. Rival SMRT Taxis is expected to follow suit.

The last fare revision was in 2007 and was also initiated by ComfortDelGro. Its competitors then followed suit.

ComfortDelGro shares closed trading yesterday up two cents at $1.44.

ComfortDelGro revises taxi fare structure

ComfortDelGro is making a mixed bag of changes to its taxi fare structure that will kick in from 6am next Monday, and other taxi companies may soon follow suit.

While the peak period surcharge will be 10 percentage points lower at 25 per cent of the metered fare, passengers will be hit by the surcharge an hour earlier in the morning on weekdays, starting from 6am. At night, while the peak period will start an hour later at 6pm, it will end only at midnight, instead of at 8pm.

On top of that, Sundays and public holidays, previously free of peak period surcharges, will have the evening peak period surcharge kick in, also from 6pm to midnight.

‘Weekends and public holidays, which used to be ‘quieter’, have also seen a sizeable jump in demand for taxi services in recent years,’ ComfortDelGro said in a statement yesterday.

The largest taxi operator in Singapore, its taxi companies Comfort Transportation and CityCab together manage a fleet of 15,700 cabs, which represents 66 per cent of the estimated 23,800 total taxi strength in Singapore.

Its competitor, SMRT Taxis, ‘will be considering a fare revision as well, as operating costs for our drivers have gone up since the last fare revision in 2007’, Tony Heng, its deputy director, told BT.

The last time ComfortDelGro tinkered with its fare structure in 2007, fares went up between 10 and 49 per cent. Soon after that, other taxi operators raised their fares as well, their own fare structures revamped to resemble ComfortDelGro’s.

This time around, based on calculations by ComfortDelGro, a commuter who takes a taxi between 5pm and 6pm will see a 21 per cent – or $2.60 – reduction in taxi fare for a 10-kilometre trip. Someone taking a taxi during the extended peak hours, however, will see an increase of 33 per cent – or $3.00 – for the same trip.

The $3 city area surcharge will also extend to Sundays and public holidays, from 5pm to midnight, under the new fee structure. The $1 public holiday surcharge that is currently levied, however, will be done away with.

Passengers will feel the pinch from the time they hail the cab, with flagdown rates 20 cents higher for the first km. For limousines, the flagdown rate will go up 70 cents, to $3.90.

Once in the cab, distance fares will be two cents higher, but ‘the meter will move slower’, ComfortDelGro said.

Currently, it subsequently costs 20 cents for every 385 metres up to a distance of 10km. Under the new structure, it will cost 22 cents every 400m. Beyond 10km, the rates will go from 20 cents for every 330m to 22 cents for every 350m. On a per-metre basis, it will cost more.

For every 45 seconds of waiting time, passengers will pay 22 cents – an increase of two cents.

‘Like most Singaporeans, our drivers too look forward to annual improvements in their take-home income so as to provide a better life for their families. Unfortunately, most of our drivers’ income has remained flat over the last two years due to rising costs. This adjustment is therefore timely and fair to help our drivers improve their earnings,’ said Wee Boon Kim, president of the Comfort Taxi Operators’ Association.

On the upside, current booking fees will be reduced by 20 cents to $3.30 during peak periods and $2.30 during non-peak hours.

The advance booking fee, however, will leap from $5.20 to $8 to ‘encourage more drivers to accept such bookings’, ComfortDelGro said.

ComfortDelGro revises taxi fare structure

ComfortDelGro is making a mixed bag of changes to its taxi fare structure that will kick in from 6am next Monday, and other taxi companies may soon follow suit.

While the peak period surcharge will be 10 percentage points lower at 25 per cent of the metered fare, passengers will be hit by the surcharge an hour earlier in the morning on weekdays, starting from 6am. At night, while the peak period will start an hour later at 6pm, it will end only at midnight, instead of at 8pm.

On top of that, Sundays and public holidays, previously free of peak period surcharges, will have the evening peak period surcharge kick in, also from 6pm to midnight.

‘Weekends and public holidays, which used to be ‘quieter’, have also seen a sizeable jump in demand for taxi services in recent years,’ ComfortDelGro said in a statement yesterday.

The largest taxi operator in Singapore, its taxi companies Comfort Transportation and CityCab together manage a fleet of 15,700 cabs, which represents 66 per cent of the estimated 23,800 total taxi strength in Singapore.

Its competitor, SMRT Taxis, ‘will be considering a fare revision as well, as operating costs for our drivers have gone up since the last fare revision in 2007’, Tony Heng, its deputy director, told BT.

The last time ComfortDelGro tinkered with its fare structure in 2007, fares went up between 10 and 49 per cent. Soon after that, other taxi operators raised their fares as well, their own fare structures revamped to resemble ComfortDelGro’s.

This time around, based on calculations by ComfortDelGro, a commuter who takes a taxi between 5pm and 6pm will see a 21 per cent – or $2.60 – reduction in taxi fare for a 10-kilometre trip. Someone taking a taxi during the extended peak hours, however, will see an increase of 33 per cent – or $3.00 – for the same trip.

The $3 city area surcharge will also extend to Sundays and public holidays, from 5pm to midnight, under the new fee structure. The $1 public holiday surcharge that is currently levied, however, will be done away with.

Passengers will feel the pinch from the time they hail the cab, with flagdown rates 20 cents higher for the first km. For limousines, the flagdown rate will go up 70 cents, to $3.90.

Once in the cab, distance fares will be two cents higher, but ‘the meter will move slower’, ComfortDelGro said.

Currently, it subsequently costs 20 cents for every 385 metres up to a distance of 10km. Under the new structure, it will cost 22 cents every 400m. Beyond 10km, the rates will go from 20 cents for every 330m to 22 cents for every 350m. On a per-metre basis, it will cost more.

For every 45 seconds of waiting time, passengers will pay 22 cents – an increase of two cents.

‘Like most Singaporeans, our drivers too look forward to annual improvements in their take-home income so as to provide a better life for their families. Unfortunately, most of our drivers’ income has remained flat over the last two years due to rising costs. This adjustment is therefore timely and fair to help our drivers improve their earnings,’ said Wee Boon Kim, president of the Comfort Taxi Operators’ Association.

On the upside, current booking fees will be reduced by 20 cents to $3.30 during peak periods and $2.30 during non-peak hours.

The advance booking fee, however, will leap from $5.20 to $8 to ‘encourage more drivers to accept such bookings’, ComfortDelGro said.

DTL: short-term pain, long-term gain

Some pain before the gain in DTL profitability; lowering TP. Though we are positive on CD’s award of the DTL in the long run, we believe it will incur initial start up losses. We expect DTL to be loss making up to 2019, before turning profitable. We reduce our FY13 earnings forecast by 5%, and lower our DCF derived TP to S$1.70 (from S$1.81 previously). Maintain BUY. We continue to favour CD over SMRT for its more attractive valuation with FY12 P/E of 11.3x, as well as its overseas growth potential.

Recall that NEL took three years to breakeven. We believe it is normal for a train operator to incur losses during its initial running phase. NEL opened in 2003 but only became profitable in 2006. We expect ridership for DTL to take time to reach steady state, while additional staff may have to be trained before actual operations commence. CD will also have to pay a license charge which will add on to cost. These will be negative for earnings at the start.

Overall positive on operations. Expecting DTL to be profitable once operations stabilise. A key positive for DTL is its over 150k sqft of GFA, which is more than 4 times NEL’s. Rental income for NEL formed a significant 18% of CD’s FY10 rail operating profit so we expect rental from DTL to be a key contributor to rail profitability going forward as well. Jan – Aug 11 ridership growth for bus and rail continues to be strong at 6.7% and 14.8% YoY respectively.

DTL a booster to future earnings, but lower value in the short term. We lower our DCF derived TP (WACC 9.4%, terminal growth rate 1.5%) to S$1.70 as we factor in initial years of operation losses from DTL stages 1 – 3. However, we are positive on profit contribution for DTL in the longer term. CD has also indicated that it will maintain its dividend payout ratio of at least 50% of earnings. We continue to like CD for its (1) attractive valuations, trading at FY12 P/E of 11.3x (versus SMRT’s CY12 P/E of 16.0x), and (2) its overseas growth potential.