ComfortDelgro

Kim Eng on 14 Feb 2012

ComfortDelgro (CD SP) – Steady as she goes
Previous day closing price: $1.48
Recommendation – Buy (maintained)
Target price – $1.75 (maintained)
Another consistent performance. ComfortDelgro’s 4Q11 results were slightly above our expectations with net profit increasing by 3.5% YoY to $56.5m on broad-based revenue growth of 6.4%. We understand that the growth would have been even stronger if not for the negative foreign currency translation effect. A higher final DPS of $0.033 was declared (versus $0.028 last year) for a full-year DPS of $0.06. This would translate into a decent annualised yield of 4.1%. Reiterate Buy.

Taxi segment did well. Full-year revenue from the group’s taxi business crossed the $1b mark for the first time, partly due to the full contribution of Swan Taxis that was acquired in October last year. In Singapore, revenue from the taxi business was 7.6% higher at $748.7m given higher rental income from a larger fleet, an increase in new replacement taxis and a higher volume of cashless transactions.

Core bus operation turns into red. On the other hand, bus revenue at SBS Transit increased by 3.1% to $566.1m as average daily ridership grew by 6.0%, which more than compensated for the 2.5% drop in average fares. If bus advertising and rental income were included, total revenue would be 3.1% higher at $603.5m. For its core bus business, however, SBS Transit incurred an operating loss of $6.0m compared to an operating profit of $14.9m in 2010 due mainly to higher fuel costs.

Stable rail business. Revenue from the rail business increased by 10.5% to $134.4m as average daily ridership for both the North East Line (NEL) and the Light Rail Transit (LRT) Systems grew by 12.9% to 427,400 and 15.7% to 60,000, respectively. Including advertising and rental income, total revenue would be $147.0m, representing an increase of 9.4% over the previous year.

Valuation remains attractive vis-à-vis its peer. We tweaked our FY12F-14F earnings forecasts marginally by 2-3% to reflect the better-than-expected FY11 results. Accordingly, our target price goes up to $1.75, which still implies an 18.2% upside to the current share price. Maintain Buy.