ComfortDelgro – CIMB
Still hit by weak sterling
• In line; maintain Underperform. 4Q09 core net profit of S$54.1m (+20.8% yoy) was broadly in line with our estimate (S$53.5m) and consensus. FY09 core net profit rose 26.5% yoy to S$219.5m. We maintain our FY10-11 estimates and introduce FY12 forecasts. Our target price remains S$1.73 (WACC: 10.4%, terminal growth: 2%), still applying a 10% discount to our DCF valuation to account for forex risks. We maintain Underperform given a lack of catalysts. We continue to prefer SMRT to CD given that SMRT should be a bigger beneficiary of the opening of integrated resorts in Singapore, as it has larger train operations.
• Hit by weaker £ and A$. FY09 revenue slipped 2.2% yoy to S$3.1bn, mainly due to a negative forex translation effect of S$102.2m offset by an increase in revenue of S$33.8m. Operating costs of S$2.4bn fell 6.1% yoy with declines mainly in fuel and electricity, materials and consumables and contract services. FY09 EBITDA margin of 20.6% was better than FY08’s 17.4% on lower fuel and energy prices and cost savings from Jobs Credit in Singapore. Overseas operations contributed 43.5% of revenue, up from 42.9% a year ago. CD declared a final dividend of 2.67 cts/share, in line with expectations. Including its interim dividend, FY09 dividend was 5.3cts.
• Operational review. Train revenue rose thanks to higher average ridership (+5.9%) for the North-East Line. However, bus revenue fell mainly due to a negative translation effect from weakness in the sterling and A$. Taxi revenue also fell due to weaker revenue from the UK and Vietnam, partially offset by higher Singapore (rise in cashless transaction volume and a larger fleet) and China revenue (a larger fleet and higher rentals).CD continues to guide that revenue from its UK business will be affected by translation effects from £ weakness.
ComfortDelgro – DMG
Business as usual; earnings in-line
4Q09 results in-line with expectations. ComfortDelGro registered 4Q09 PATMI of S$54.1m, up 20.8% YoY (-2.7% QoQ). 2009 PATMI of S$219.5m (+9.7%) was 98.5% of our full year forecast of S$222.8m (consensus S$219.7m). 4Q09 revenue rose 3.4% YoY to S$794.3m despite negative translation effect of the weaker £ and A$. In tandem with the rise in revenue, operating profit rose 15.4% to S$83.0m as operating expense growth was capped at 2.2%. Not for the negative foreign currency translation effect, the increase in operating profit for FY09 would have been S$358.9m (+29.1%). Maintain BUY with a DCF-derived target price of S$1.78.
Has rail cannibalised bus ridership? In 2009, NEL rail ridership rose 5.9% to 0.37m (2008 growth: 15.4%). This is in contrast with the 1.3% fall in bus ridership. While management pointed out that the decline in bus ridership was due to poor economic conditions, we believe the overlapping of inter-town bus service routes with MRT lines will continue to draw more bus commuters towards rail, due to the relatively faster journey times. We expect the cannabilisation process to continue with rail ridership growing by a stronger 10% in 2010 underpinned by tourism growth. In contrast, we expect bus ridership to decline by 2%.
Key takeaways from analyst briefing. Management expects: 1) Singapore bus revenue to decline in 2010 (we believe this is in view of fare reduction and weaker ridership); 2) bus revenue from Australia to improve with additional services while bus business in China will grow with higher ridership; 3) taxi revenue growth in Singapore, China and Vietnam to remain unchanged in 2010; and 4) revenue from UK operations to continue to be impacted by currency translation losses.
At its mid range of its 13-17x trading band. A final dividend of 2.67¢ was declared on top of its interim dividend of 2.63¢ paid earlier (representing a payout ratio of 50%). ComfortDelGro trades at 14.5x FY10 P/E multiple, which is at its mid-range of 13-17x trading band. Our DCF-derived TP of S$1.78 has an implied P/E multiple of 16.5x.
SBSTransit
All the data are extracted from the results,
|
|
Q408 |
FY08 |
Q109 |
Q209 |
Q309 |
Q409 |
FY09 |
|
Revenue |
186,817 |
729,643 |
179,622 |
168,898 |
174,327 |
174,236 |
697,083 |
|
Operating Profit |
13,049 |
47,081 |
20,639 |
15,810 |
11,942 |
13,812 |
62,203 |
|
PBT |
13,411 |
50,281 |
21,029 |
16,161 |
12,158 |
13,982 |
63,330 |
|
Net Profit |
10,576 |
40,580 |
18,785 |
13,531 |
10,582 |
11,714 |
54,612 |
|
NPM |
5.66% |
5.56% |
10.46% |
8.01% |
6.07% |
6.72% |
7.83% |
|
Cash |
32,853 |
<- |
46,006 |
42,963 |
25,650 |
6,057 |
<- |
|
Loan – NCL |
— |
<- |
— |
— |
— |
— |
<- |
|
Loan – CL |
— |
<- |
— |
— |
— |
— |
<- |
|
NAV (ct) |
84 |
<- |
90 |
91 |
90 |
94 |
<- |
|
EPS (ct) |
3.43 |
13.19 |
6.1 |
4.4 |
3.44 |
3.81 |
17.75 |
|
DPS (ct) |
3.6 |
6.6 |
— |
4.5 |
— |
4.3 |
8.8 |
Notes :
- All figures in S$,000 unless otherwise stated
- FY is End-Dec
ComfortDelgro
All the data are extracted from the results,
|
|
Q408 |
FY08 |
Q109 |
Q209 |
Q309 |
Q409 |
FY09 |
|
Revenue |
775.0 |
3,125.6 |
716.6 |
758.3 |
782.6 |
794.3 |
3,051.8 |
|
Operating Profit |
73.9 |
278.0 |
81.5 |
94.5 |
90.9 |
83.0 |
349.9 |
|
PBT |
72.9 |
300.3 |
78.9 |
90.3 |
86.5 |
78.4 |
334.1 |
|
Net Profit |
57.9 |
249.2 |
67.0 |
71.3 |
68.3 |
69.1 |
275.7 |
|
NPM |
7.47% |
7.97% |
9.35% |
9.40% |
8.73% |
8.70% |
9.03% |
|
Cash |
408.3 |
<- |
412.1 |
447.5 |
450.4 |
485.6 |
<- |
|
Loan – NCL |
78.2 |
<- |
191.6 |
414.8 |
424.1 |
466.4 |
<- |
|
Loan – CL |
143.1 |
<- |
122.8 |
153.1 |
139.7 |
130.4 |
<- |
|
NAV (ct) |
74.65 |
<- |
78.47 |
78.94 |
78.90 |
81.01 |
<- |
|
EPS (ct) |
2.13 |
9.59 |
2.52 |
2.74 |
2.67 |
2.59 |
10.52 |
|
DPS (ct) |
2.40 |
5.00 |
— |
2.63 |
— |
2.67 |
5.30 |
Notes :
- All figures in S$Mil unless otherwise stated
- FY is End-Dec
SingTel – CIMB
Weighed down by India
Post-results conference call
Maintain Underperform. We came away with our views unchanged on SingTel following its 3QFY10 results conference call. SingTel indicated that the commercial launch of NGNBN would likely be delayed to early 2H10 from April, but that it would continue to benefit as a contractor building the network. SingTel was non-committal on any potential capital management and we do not think it will happen at the end of
FY10. We raise our FY10-12 earnings estimates by 2-4% to account for a lower effective tax but maintain our sum-of-the-parts target price of S$3.30. SingTel remains an UNDERPERFORM as stiff competition and the auction for 3G spectrum in India coupled with prospects of intensifying competition in Australia loom over the stock. While its 3QFY10 performance was fairly strong, it was bolstered by a strong A$ which is now giving back some of its gains and a one-off tax credit in Singapore. We prefer M1 (Outperform, TP: S$ 2.07) for its potential capital management and benefits from NGNBN.
Group
Non-committal over capital management and Optus IPO. As usual, SingTel was vague about its capital-management plans despite a fall in its net debt/annualized EBITDA to below 0.9x and below its target of 1.5-2x. SingTel wants to have the financial flexibility to pursue growth and will review its cash levels if there are no imminent acquisitions. While its 3QFY10 net debt/annualised had drifted down to 0.85x and substantially below its target, we believe it is unlikely to declare anything substantial at end-FY10 because financial markets remain volatile, especially with concerns over sovereign debt defaults in Europe. SingTel had in the past returned 10-15 cts/share in dividends or capital when its net debt/annualised EBITDA fell to 0.8x. However, capital management at end-2010 is more likely as gearing continues to fall and financial markets normalise. SingTel was equally vague about its rumoured plans to list Optus and said it will consider anything that is value-accretive.
Still Asia-focused. SingTel reiterated that it remains focused on acquiring assets in the Asia Pacific and regions such as the Middle East and Africa. However, it added that it will be acquiring new capabilities to maximise the value of its existing assets. We believe this includes stimulating wireless broadband take-up and multimedia services among its emerging associates.
Singapore
Loss-leader strategy for mioTV. SingTel does not operate mioTV as a standalone business because mioTV is meant to help raise ARPUs for its broadband business and help SingTel make the transition from carriage provider to a multimedia service provider. We interpret this as SingTel positioning mioTV as a loss leader and will continue to be aggressive in acquiring content. This spells bad news for StarHub (Underperform, TP: S$2.14), in our view.
Likely delay in launch of NGNBN. SingTel indicated that commercial launch of NGNBN is likely to be delayed to early 2H10 from April, but the penalty for this will not be significant. No reasons were given for the delay and it expects the regulator to make an announcement on this.
Benefiting from rollout of NGNBN. With the rollout of the NGNBN in progress, SingTel is benefiting as a contractor via its IT units. While Open Net (the operating company) has not issued any capex guidance, SingTel indicated that Open Net’s capex should peak in 2010, which would be positive for SingTel. SingTel’s 3QFY10 IT and Engineering revenue jumped 13% qoq and contributed to a modest 7% of group revenue.
Australia
EBITDA guidance maintained. Optus reaffirmed its single-digit EBITDA guidance for FY10 despite its: 1) strong push for market share in mobile which would inevitably sacrifice margins; 2) 4Q09 strength; and 3) 9M10 yoy EBITDA growth of only 4%, as it expects 4QFY10 to be seasonally stronger.
Slowing on-net fixed broadband but strong wireless broadband. Optus’s on-net fixed broadband net adds had moderated to 8K in 3Q from the 25K-33K in the past few quarters because of competition and the somewhat substitutable but mainly complementary effects of wireless broadband. On the positive side, wireless broadband net adds were still healthy as Optus added 111K in 3Q vs. the 100K-104K net adds seen in past quarters.
Fixed-line strategy. Optus reiterated its three-pronged fixed-line strategy: 1) focus on its on-net business where it is upgrading its HFC network in Melbourne and Brisbane; 2) concentrate on driving costs down; and 3) preparing for NBN. Efforts have paid off with its business and wholesale EBITDA margins raised from the high teens to the mid-20s in 3QFY10, and EBITDA margins rising to 15% in consumer and SMB from 13% a year ago. It has also captured a 20% market share in areas where it has network coverage.
Of spectrum, LTE and NBN. The recent acquisition of 10 MHz of paired spectrum in 2100 MHz in eight capital cities would help to improve the quality and capacity of its network and help it cope with wireless broadband traffic. While it is running LTE trials currently, it does not see spectrum availability or the necessary devices and applications before 2012. Finally, on NBN, it is providing data and input for wholesale pricing and hopes for competitive access terms that would provide the best cost to taxpayers. It also hopes that any cash payment paid to the incumbent for use of passive infrastructure or copper assets would be made visible and transparent.
Valuation and recommendation
Raising forecasts on lower tax assumptions. We have raised our FY10-12 core net profit estimates by 2-4% to account for a lower-than-expected effective tax, especially in FY10. This is due to tax credits from a lower statutory tax rate in Singapore from 18% to 17% this year. We have assumed higher FY11-12 core net profit estimates after lowering our effective tax for its associates, based on YTD trends. However, our sum-of-the-parts target price of S$3.30 is unchanged as our earnings revisions are minor. SingTel remains an UNDERPERFORM as we believe intense competition in India coupled with prospects of a heated 3G spectrum is likely to weigh on stock sentiment. Also, competition in Australia could intensify with Vodafone Hutchison Australia looking to unseat Optus for the second spot. While its 3QFY10 performance was fairly strong, it was bolstered by a strong A$ which is now giving back some of its gains and a one-off tax credit in Singapore. Switch to M1 (Outperform, TP: S$ 2.07) for its potential capital management and benefits from NGNBN.