ComfortDelgro – BT
ComfortDelGro posts 7.7% drop in Q1 profit
HIGHER costs for energy as well as materials and consumables were mostly to blame for ComfortDelGro’s net profit for the first quarter ended March 31, 2011 slipping 7.7 per cent to $50.1 million.
But Q1 revenue inched up 4.7 per cent to $803 million on broad-based growth in the group’s key businesses.
Earnings per share in the first quarter fell to 2.40 cents from 2.60 cents in the previous corresponding period. The group’s net asset value per share was 88.28 cents as at March 31, 2011, from 86.20 cents three months earlier.
Q1 operating profit fell 4.1 per cent to $86.9 million as operating expenses climbed 5.9 per cent to $716.1 million mainly due to the higher cost of materials and consumables, higher fuel and electricity costs, and an increase in staff cost and the absence of Jobs Credit in Singapore.
‘The inflationary pressures in the countries we operate will continue to impact our cost of operations,’ said ComfortDelGro managing director and group CEO Kua Hong Pak. ‘Fuel and electricity costs will remain high if prices continue on the current trend.’
ComfortDelGro is the world’s second-largest transport group and revenue from its overseas operations accounted for 41.8 per cent of total group revenue – down from 42.9 per cent in the same quarter a year ago. It is targeting 70 per cent of its total revenue from overseas in the medium term.
The group’s bus business led growth in Q1 by contributing 37 per cent of the increase in group revenue. This was followed by the taxi business (32 per cent), the automotive engineering services business (11 per cent), the rail business (10 per cent) and the vehicle inspection and testing business (6 per cent). The remainder of the revenue increase (4 per cent) came from the car rental and leasing, bus station, and driving centre businesses.
Revenue from bus operations in Q1 rose 3.5 per cent to $392.6 million, as overseas bus revenue continued to exceed those of the Singapore operations by accounting for $237.9 million or 60.6 per cent of total group bus revenue.
The taxi business saw revenue rise 4.9 per cent to $248.3 million on growth in the Singapore business and the inclusion of revenue from Swan Taxis in Perth, which was acquired in October 2010. The overseas taxi segment accounted for 28.1 per cent of group taxi revenue.
Rail revenue in Q1 increased 13.1 per cent to $32.5 million as average daily ridership on the North-East Line and the two LRTs increased. Adding rental and advertising income, total rail revenue grew 11 per cent to $35.4 million.
Looking ahead, ComfortDelGro sees Singapore bus revenue rising with ridership growth. Higher ridership and hence revenue are also expected from the rail business, while revenue from the Singapore taxi business is likely to increase with more cashless transactions and new replacement taxis.
STEng – Phillip
1QFY11 forms 20% of forecast; still undervalued
• Revenue increased by 15.2% to S$1.57bn, PATMI increased 19.7% to S$111mn
• Strong order book of S$11.3bn
• 1QFY11 forms 20% of FY forecast
• Kept forecasts unchanged
• Maintain Buy recommendation with target price of S$3.76
1QFY11 results discussion. Revenue for 1QFY11 was significantly higher than the same period last year primarily due to several milestone project completions and deliveries from various segments. Consequently, PATMI recorded a strong 19.7% surge to make up 20% of our full year forecast. The order book of the group is currently worth S$11.3bn (1.8X sales) and management guided that c.S$3bn would be realized over the rest of the year. STE’s order book typically accounts for c.60-70% of the year’s sales. Assuming these S$3bn of orders form 65% of sales for the rest of the year, full year revenue would be worth S$6.18bn (vs PSR est: S$6.23bn). Hence, we believe our forecasted sales for the year is
realistic and could have further upside if STE wins significant contracts hereon.
Risks. Further weakening of US$ & € against S$; Slow down in capacity added by commercial customers; Rise in interest rates could reduce attractiveness of STE’s dividend yield; Greater risk appetite by investors could reduce demand for low beta stocks.
Valuation. We used a blended valuation model of DCF (COE: 7.9%, terminal g: 3.5%) & P/E (20X FY11E EPS) to arrive at our target price of S$3.76. After incorporating dividend forecast of 14.8cents, we expect total returns of 26.8% to our target price. At the current market price, STE trades at merely 17X FY11E EPS as compared to its full cycle average of 19X P/E.
SingTel – DBSV
Next special dividend could be 3 years away
At a Glance
• 4Q11 underlying profit of S$998m (-2.4% YoY, +3QoQ) was inline with consensus. Strong Optus offset disappointment from associates.
• Proposed special DPS of 10 Scts after 4 years wait. Final DPS of 9 Scts (plus interim DPS of 6.8 Scts) translates to 66% payout ratio.
• Next capital management could be 3 years away. 70% earnings payout ratio may not be very attractive in our view.
Comment on Results
Strong Optus offset disappointment from associates. Optus’ 4Q11 net profit of A$261m was up 54% QoQ versus our expectation of 30% mainly due to sequential decline of A$25m (S$32m) in outpayment and leasing costs thanks to stronger AUD versus USD and write back of a one-off provision. This offset the weak earnings contribution from associates Bharti & Telkomsel.
Management guidance for FY12F brings no surprises.
(a) Stable EBITDA for Singapore (1.6% decline in FY11) and capex of S$900m (S$726m in FY11). This is slightly lower than our estimate of 2% EBITDA growth. (b) Low-single digit growth in EBITDA for Optus (8% growth in FY11) and capex of A$1.2bn (A$1bn in FY11). This is broadly inline with our estimate of 4% EBITDA growth. (c) No concrete guidance on pre-tax profit for associates as usual (10% decline in FY11). We estimate 9% growth for associates.
With 3% earning growth in FY12F, investors might appreciate regular yield north of 6%. SingTel declared a special dividend of 10 Scts after a gap of four years taking total FY11 dividend yield to an impressive 8%. However, SingTel reviews capital management potential every 3 years, implying 3 years wait for next special dividend. We maintain HOLD as regular dividend yield of less than 6% is not very attractive.
STEng – BT
ST Engg’s Q1 profit jumps 20% to $111m
Revenue rises 15% to $1.57b; EPS up 19% to 3.65 cents
SINGAPORE Technologies Engineering (ST Engineering) yesterday posted a 20 per cent jump in first-quarter net profit to $111.1 million, from $92.8 million a year ago.
The net profit increase came on the back of a 15 per cent rise in the conglomerate’s revenue for the three months ended March 31.
Group revenue rose to $1.57 billion from $1.36 billion a year earlier, lifted by its electronics and land systems sectors, while its aerospace arm posted the strongest profit growth.
Earnings per share grew 19 per cent to 3.65 cents, while net asset value rose to 57.53 cents as at end-March, from 55.24 cents a year earlier.
For the first quarter, commercial sales came to $892 million, or 57 per cent of total turnover for the group, which derives significant revenues from supplying equipment to the Republic of Singapore Armed Forces and other military customers.
The land systems arm saw a 35 per cent jump in revenue to $358 million, thanks to higher project deliveries from its automotive business segment.
Double-digit revenue growth was also seen in the electronics arm, whose turnover rose 24 per cent to $444 million, thanks to milestone completions of the Circle Line and half-height platform screen door projects for the Land Transport Authority. Both sectors thus saw double-digit growth in Q1 net profit too.
While revenue for the aerospace arm was flat from a year ago, it still managed 33 per cent jump in pre-tax profit, thanks to a favourable sales mix and foreign exchange gains. As for the smallest of the four, the marine sector, revenue edged up 6 per cent on increased shiprepair activity but net profit dipped.
Overall, the group’s cash and cash equivalents and short-term investments totalled $1.85 billion, while advance payments from customers stood at $1.6 billion.
ST Engineering also secured new orders in the quarter, including aerospace maintenance and shipbuilding contracts, ending with an order book of $11.3 billion. Of this, it expects $3 billion to be delivered in the rest of 2011.
In the stock market yesterday, ST Engineering shares closed one cent higher at $3.08.
SingTel – DBSV
Needs higher payout ratio to outperform
• Bharti may grow slower than expected, eroding SingTel’s appeal as a cheap proxy to Bharti.
• Slow adoption of Android phones in Singapore is not helping SingTel either.
• Downgrade to HOLD with lower TP of S$3.20. Special dividends cannot be ruled out with 4Q11 results in order to compensate for lack of earnings growth.
Trimmed FY12F/13F group earnings by 4% / 6% mainly due to Bharti. While improved competitiveness in India and margin improvement in Africa bode well for Bharti, we underestimated the cost pressure from 3G rollout in India. Keeping in mind, higher depreciation & amortization and tax expenses, we downgraded Bharti’s earnings growth in FY12F to 15% from 30% earlier.
Slow adoption of Android phones. Singapore continues to lag behind markets like US and UK in terms of popularity of Android based phones, which require lower subsidies than iPhones. Higher breakeven costs of iPhones may continue to burden the margins of cellular players in Singapore.
Needs higher payout ratio to outperform in our view. We are projecting a 70% payout ratio for FY11F/12F, towards the top end of SingTel’s guidance of 55%-70%. Given non-compelling growth prospects, SingTel needs to (i) increase its earnings payout ratio to ~80% to formulate an attractive (~6.5%) dividend yield, or (ii) perform capital management proactively on top of its 70% payout ratio. Downgrade to HOLD with revised SOTP based TP of S$3.20. The stock is trading at 12.5x FY12F PE below its 4-year average of 13.2x. As such, downside risk is also limited in our view.