Defensive diversified earnings


• Within expectations. 4Q07 core net profit of S$50.1m (+4.2% 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. FY07 core net profit of S$223m (+10.1% yoy) was also within consensus and our estimates, with a reported EPS of S$0.1073. There was an exceptional item of S$42.1m on FY06 relating to the share exchange in Cabcharge Australia. Operating revenue rose 7.9% yoy to S$2.98bn, with overseas operations contributing 47% of the group, up from 45% in FY06. A tax-exempt final dividend of S$0.0265 was declared.

• Bus segment continues to be boosted by overseas operations, turning in revenue growth of 11.9% yoy to S$1.54bn in FY07 on higher ridership and SBS Transit and Shenyang ComfortDelgro Bus and from the implementation of new services at Shenyang ComfortDelgro Anyun Bus, and higher mileages operated by Metroline at better rates and more services as Cabcharge.

• Taxi revenue grew 5.9% yoy to S$917.3m in FY07, mainly due to larger operating fleets in China (Chengdu, Nanning and Jilin), more taxi call bookings in Singapore and more corporate jobs in the UK. Contributions also came from new taxi business in Nanjing and higher taxi advertising income in Singapore. Operating profit in FY07 rose 12.4% yoy to S$121.2m. Rail operations performed well, with revenue up 18.2% yoy to S$90.5m on increased ridership. Operating profit at S$9.2m was a significant improvement from S$0.6m in FY06.

• Maintain Outperform and higher target price of S$2.57. As we roll forward into FY08, we adjusted our FY08-09 forecasts by 3-4% and introduce our FY10 forecasts. Our DCF valuation derives a target price of S$2.57 on a higher WACC assumption of 9.3% (vs 8% previously) to reflect a higher cost of equity. The stock is well-supported by its attractive dividend yield of 7%.

ComfortDelGro’s full-year profit falls 8.8% to $223m

COMFORTDELGRO’S net profit for the full year ended Dec 31, 2007 slipped 8.8 per cent to $223 million, despite revenue growing 8 per cent to $3.02 billion on the strong performance of its overseas bus and taxi operations.

The drop in earnings was due to an exceptional gain of $42.1 million the previous year from a share exchange with partner Cabcharge Australia, a taxi charge card company. Stripping out that gain, net profit would have increased 10.1 per cent.

The land transport giant said that this is the first time that revenue has crossed the $3 billion mark. Overseas turnover, led by the UK, China and Australia, accounted for 47 per cent of the group’s total turnover, up from 45 per cent the previous year.

Operating profit grew by 9.6 per cent to $334.8 million, with overseas operations accounting for 46 per cent of this record figure – up from 42 per cent the year before. But total operating expenses rose 7.8 per cent to $2.68 billion, with the biggest component – staff costs – spiking 10.2 per cent to $950.7 million. Energy and fuel costs were up 10.7 per cent to $216.9 million.

Full-year turnover for the bus business rose 11.9 per cent to $1.5 billion. Turnover from overseas bus operations accounted for 62 per cent of this figure – the fourth consecutive year that it has been higher than that of Singapore operations.

Listed unit SBS Transit’s revenue for the full year to Dec 31, 2007 rose 6.6 per cent to $670 million on higher bus and rail fare, as well as higher advertisement revenue. But its net profit fell 10.9 per cent to $50 million on higher operating expenses from depreciation, repairs and maintenance, and staff and fuel costs. SBS, whose 2007 earnings per share were 16.37 cents (down from 2006’s 18.52 cents), proposed a final dividend of 3.25 cents a share.

Meanwhile, turnover from ComfortDelGro’s taxi business grew 5.9 per cent to $917.3 million, with overseas taxi operations making up 40 per cent of total taxi turnover. In Singapore, turnover grew 4.9 per cent to $552.7 million due to a surge in corporate jobs and call bookings.

The rail business rolled to an 18.2 per cent increase in turnover to $90.5 million on increased patronage of the North-east MRT Line and the two LRT lines. Operating profit was $9.2 million, up from $600,000 the year before, marking its second year in the black.

ComfortDelgro’s earnings per share fell to 10.73 cents from 11.82 cents the previous year, while net asset value for the group rose to 71.11 cents from 69.61 cents a year ago.