ComfortDelGro’s 1Q13 results saw revenue increasing slightly by 1.8% YoY to S$870.8m on the back of broad–based growth across its segments while operating profit improved 2.8% to S$95.9m as higher staff and repairs and maintenance expenses were offset by a reduction in fuel and electricity expenditure. As a result, PATMI rose 7.9% to S$57.7m. In the coming quarters, we expect a fare increase to be implemented by the government in FY13, and the group should to continue benefiting from lower fuel costs due to the favourable fuel outlook and proactive hedges in place, which should offset sustained weakness in the SG bus business. While we continue to prefer ComfortDelgro over SMRT, we maintain our HOLD rating with an unchanged fair value estimate of S$1.95 in light of its recent ~8% appreciation
1Q13 results show YoY improvement
ComfortDelGro’s 1Q13 results saw revenue increasing slightly by 1.8% YoY to S$870.8m on the back of broad–based growth across its segments while operating profit improved 2.8% to S$95.9m as higher staff (+5.1% to S$276.5m) and repairs and maintenance expenses (+1.7% to S$42.9m) were offset by a reduction in fuel and electricity expenditure (-9.7% to S$64.9m). As a result, PATMI rose 7.9% to S$57.7m.
Group to benefit from lower fuel costs
The group has benefited from proactive fuel hedges put in place during the lull in fuel prices, and this has helped to mitigate cost pressures in other areas (i.e. increase in hiring related to the Downtown Line) as well as take the sting out of sustained weakness in its SG core bus operations, which saw a wider operating loss of S$5.4m (1Q12: -S$3.7m). With 60-70% of its diesel and 70% of its electricity requirements hedged for FY13, we expect this trend to continue in the coming quarters.
No word on possible fare increase but other catalysts remain
We had previously expected the fare review committee to announce a fare increase by the middle of 2Q13. With that time-frame now unrealistic, we temper our projections for ComfortDelgro’s Singapore operations for the remainder of FY13 but still expect to see an implementation this year. Nonetheless, the group’s other segments (i.e. Viacom, taxi etc) and overseas ventures remain attractive. For instance, it is in the tendering process for additional bus routes in NSW, Australia, and if successful, will benefit the group beyond FY13.
Maintain HOLD
We continue to prefer ComfortDelgro over SMRT in light of its more diversified revenue streams and overseas investment acumen. However, in light of its recent ~8% appreciation, we maintain our HOLD rating with an unchanged fair value estimate of S$1.95.
ComfortDelGro’s 1Q13 results saw revenue increasing slightly by 1.8% YoY to S$870.8m on the back of broad–based growth across its segments while operating profit improved 2.8% to S$95.9m as higher staff (+5.1% to S$276.5m) and repairs and maintenance expenses (+1.7% to S$42.9m) were offset by a reduction in fuel and electricity expenditure (-9.7% to S$64.9m). As a result, PATMI rose 7.9% to S$57.7m.
Group to benefit from lower fuel costs
The group has benefited from proactive fuel hedges put in place during the lull in fuel prices, and this has helped to mitigate cost pressures in other areas (i.e. increase in hiring related to the Downtown Line) as well as take the sting out of sustained weakness in its SG core bus operations, which saw a wider operating loss of S$5.4m (1Q12: -S$3.7m). With 60-70% of its diesel and 70% of its electricity requirements hedged for FY13, we expect this trend to continue in the coming quarters.
No word on possible fare increase but other catalysts remain
We had previously expected the fare review committee to announce a fare increase by the middle of 2Q13. With that time-frame now unrealistic, we temper our projections for ComfortDelgro’s Singapore operations for the remainder of FY13 but still expect to see an implementation this year. Nonetheless, the group’s other segments (i.e. Viacom, taxi etc) and overseas ventures remain attractive. For instance, it is in the tendering process for additional bus routes in NSW, Australia, and if successful, will benefit the group beyond FY13.
Maintain HOLD
We continue to prefer ComfortDelgro over SMRT in light of its more diversified revenue streams and overseas investment acumen. However, in light of its recent ~8% appreciation, we maintain our HOLD rating with an unchanged fair value estimate of S$1.95.
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