ComfortDelGro’s (CDG) 3Q13 results exceeded our expectations with revenue increasing 8.6% YoY to S$978.4m while operating profit and PATMI grew 4.8% YoY to S$122.4m and 5.4% YoY to S$76.7m, respectively. The newly acquired Metroline West bus service in UK was the main contributor to the improved results although the group also enjoyed a better showing by SBS Transit. We expect ComfortDelgro to end FY13 with another record PATMI figure as continued strong performances from its taxi, bus and vehicle inspection operations should offset any weakness in the other segments such as rail (due to the DTL start-up costs) and driving centre operations. Based on our higher adjusted FY13/14 earnings, our fair value estimate increases to S$2.20 (S$1.95 previously). Maintain BUY.
3Q13 results exceed expectations
ComfortDelGro’s (CDG) 3Q13 results exceeded our expectations. Revenue grew 8.6% YoY to S$978.4m on the back of higher bus/rail ridership and taxi rentals while operating profit grew 4.8% YoY to S$122.4m. Although operating profit margin fell 0.5ppt to 12.5%, we are comforted by the lower-than-projected pace of operating expense increases. PATMI for 3Q13 came in 5.4% YoY higher to S$76.7m.
UK bus business main catalyst
The newly acquired Metroline West bus service in UK was the main contributor to the improved results, adding S$54.2m to the group’s top-line. The group also benefited from a better showing by SBS Transit, which narrowed its core operating loss to S$0.9, from -S$1.8m over the same period last year.
ComfortDelgro to end year on a high
On account of the better 3Q13 performance, we raise our FY13/14 revenue by 3% and incorporated better operating margins, resulting in higher earnings. We expect ComfortDelgro to end FY13 with another record PATMI figure as continued strong performances from its taxi, bus and vehicle inspection operations should offset any weakness in the other segments such as rail (due to the DTL start-up costs) and driving centre operations. In addition, recent events in NSW, Australia have been favourable to ComfortDelgro where the tender process for other routes has been delayed and current operators have the opportunity to renegotiate terms. While this means that ComfortDelgro will not secure new bus routes in the near-term, the renegotiation allows them to hold on to existing contracts i.e. stability in Australian operations.
Maintain BUY
We raise our fair value estimate from S$1.95 to S$2.20 based on our adjusted higher earnings, and maintain BUY on the counter. Its recent share price weakness should create an attractive opportunity for investors to allocate into this fundamentally strong company with stable earnings.
ComfortDelGro’s (CDG) 3Q13 results exceeded our expectations. Revenue grew 8.6% YoY to S$978.4m on the back of higher bus/rail ridership and taxi rentals while operating profit grew 4.8% YoY to S$122.4m. Although operating profit margin fell 0.5ppt to 12.5%, we are comforted by the lower-than-projected pace of operating expense increases. PATMI for 3Q13 came in 5.4% YoY higher to S$76.7m.
UK bus business main catalyst
The newly acquired Metroline West bus service in UK was the main contributor to the improved results, adding S$54.2m to the group’s top-line. The group also benefited from a better showing by SBS Transit, which narrowed its core operating loss to S$0.9, from -S$1.8m over the same period last year.
ComfortDelgro to end year on a high
On account of the better 3Q13 performance, we raise our FY13/14 revenue by 3% and incorporated better operating margins, resulting in higher earnings. We expect ComfortDelgro to end FY13 with another record PATMI figure as continued strong performances from its taxi, bus and vehicle inspection operations should offset any weakness in the other segments such as rail (due to the DTL start-up costs) and driving centre operations. In addition, recent events in NSW, Australia have been favourable to ComfortDelgro where the tender process for other routes has been delayed and current operators have the opportunity to renegotiate terms. While this means that ComfortDelgro will not secure new bus routes in the near-term, the renegotiation allows them to hold on to existing contracts i.e. stability in Australian operations.
Maintain BUY
We raise our fair value estimate from S$1.95 to S$2.20 based on our adjusted higher earnings, and maintain BUY on the counter. Its recent share price weakness should create an attractive opportunity for investors to allocate into this fundamentally strong company with stable earnings.
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