ComfortDelGro

Kim Eng on 14 Feb 2014

Stable performance, higher DPS
ComfortDelGro (CDG) reported another steady set of results for FY13, with net income rising 5.7% YoY to SGD263.2m. Revenue improvement for the year was largely driven by incremental contribution from the newly acquired Metroline West in the UK and higher rental and cashless transactions at its Singapore taxi business. Despite start-up losses relating to Downtown Line (DTL), operating profit improved by 3.4% YoY. Spurred by the higher profitability, management recommended a raise in FY13 DPS to 7.0 SGD cts (FY12: 6.4 SGD cts).

Initial data points from DTL positive, raise TP
Although start-up losses for DTL Stage 1 dampened profitability for its rail segment, the initial data points were still encouraging, in our view. Average daily ridership has reached about 60,000 since the line commenced service on 22 Dec 2013, a figure which compares favourably with the target of 75,000 set for Stage 1. During the results briefing, management also highlighted potential retail opportunities in the future, as the full opening of DTL would add another 10,000 sq m of retail space to its network (NEL: about 3,000 sq m). CDG is our preferred exposure in Singapore’s Land Transport sector because 1) its large taxi fleet in Singapore enables the company to consistently report industry-high earnings, 2) its diversified geographical and business exposure offers investors stable and sustainable investment returns, and 3) the opening of DTL over the next three years will see SBS Transit gain rail market share and evolve into a major operator. We raise our TP to SGD2.40 (18x FY14E P/E) from SGD2.31 following a 1-2% upward adjustment to our FY14E-16E EPS forecasts. Maintain BUY.