Comfort Delgro

Comfort Delgro: Announced 3Q11 results which was better than expected. Rev at $877m, +6.5% yoy and +4%qoq, while Net Profit at $69.1m, +12.5% yoy, bringing 9M11 net profit to $179.1m, which was 79% of consensus full-year estimates.

Stronger-than-expected earnings was mainly attributed to stronger performance by the Bus business powered mainly by Australia, with 3Q11 rev increasing 22% yoy due to growth in fleet. EBIT margin for Australia bus increased from 18.6% to 20.6% during the qtr by a combination of better efficiency gains (mainly) and stronger AUD impact. Mgt however, guided that the exceptionally strong margin this qtr is unlikely to remain sustainable, as it may attract regulatory oversight and Co. will need to justify pricing when concessions are up for renewal or when new bus services are added to existing routes.

Mgt maintains its cautious outlook for Grp, with challenges coming from higher fuel and staff costs and weakness in the UK economy. Operating expenses from Downtown Line will only kick in from 2012, when the hiring begins, while 60% of SG and UK diesel costs and full exposure of electricity cost remain unhedged. Ratings are as per follow:

JP Morgan maintains Neutral with $1.45 TP.
UOB Maintains Buy with $1.75 TP.
CIMB upgrades to O/p from Neutral with $1.59 TP.
Nomura maintains Buy, TP $1.72, 3Q11 ahead of estimates and should have a positive impact on CD’s share price.
Citi maintains Buy, TP $1.51, Strong results.
RBS maintain Sell, TP $1.35, decent 9M11 results but still believe rising operating cost and lack of pricing power will keep weighing on CD’s profitability