Comfort Delgro

Comfort Delgro: 2Q12 results in line. Net profit rose 8.5% yoy to $65m, led by higher automotive engineering and taxi profits, despite a sharp decline in Singapore bus and rail profits. Overall revenue growth was stable at +5% yoy to $885m. Interim div of 2.9ct/sh was declared (vs 2.7cts previously), representing 51% payout. Group taxi revenue continued its uptrend, increasing 9.4% yoy, mainly due to strong growth in Spore (+10.5%) and China (+18.7%), which offset the revenue decline in UK (-8%) due to negative translation effects from a weaker sterling pound. Overall taxi EBIT inched up 1.4% yoy to $36.9m, with margins firm at 13.2% vs 14.2% yoy, and 11.8% qoq. EBIT at the Spore rail operations fell sharply to $4.6m, down 39% yoy espite a 3.5% increase in revenue to $38.1m, as higher ridership on the NEL (+6.2% yoy) and LRT (+21.3% yoy) was offset by higher electricity, staff and repair & maintenance costs and start up costs for the Downtown Line. The bus division saw a 4.3% decline in EBIT to $37.5m with EBIT margin at 8.7% vs 9.2% yoy, as EBIT declines in Spore and UK offset an improvement in Australia bus EBIT. Mgt maintained they expect higher revenue from the Spore bus, taxi and vehicle inspection and testing business, Australia bus business and the group’s rail business. Says better margins should be seen in 2H12 as the group is more fully hedged at relatively attractive levels. Nomura expects a neutral reaction the results given ongoing cost pressures. Nomura has a Buy rating with TP $1.72 (under review). Deutsche keeps at Buy with TP $1.80. CIMB is Neutral with TP $1.66. Citi maintains Sell with TP $1.63. Says Comfort is its preferred land transport play but is currently fully valued.