ComfortDelGro

UOBKayhian on 28 May 2015

FY15F PE (x): 20.1
FY16F PE (x): 16.4

9% price pullback from the recent high presents a potential opportunity. We view the recent share price retracement as a buying opportunity. Given the uncertain outlook of equity markets, we believe CD’s resilient earnings and strong financials will be favoured. Opening of DTL stage 2 to feed traffic growth. We expect the Downtown Line (DTL) stage 2 to commence operations in 1Q16 while ridership continued to gain traction for stage 1 (DTL1). Average daily riderships for DTL1 grew 24.1% yoy to 67,000 passenger trips but this could be boosted further the opening of DTL stage 2 is expected to feed more traffic into DTL1. Upgrade to BUY with a DCF-based target price of S$3.30. At our target price, the implied 2016F PE of 18.4 is close to its +1SD valuation but we believe this is justified given its strong earnings track record and cash flow.