Comfort

Comfort: 3Q12 results in line. Net profit at $73m, +5% yoy, supported by firm revenue growth and rising margins. Operating revenues rose 8% YoY to $281m supported by continued growth from its Singapore taxi operations. SG Taxi revenues rose 9.8% YoY, on the back of continued growth from a growing fleet and cashless transactions following 11% growth last quarter. Bus revenues grew 6.2% which were boosted by a 2.3% rise in ridership and an LTA grant for bus drivers. Meanwhile, Rail revenues rose 2.4% as average daily ridership rose 5.3% to 457k passengers. Overseas, UK operations were flat YoY as higher revenue from its bus business was balanced buy lower taxi revenues. Australia bus revenues rose 3.8% YoY. Australian bus operations are expected to accelerate as Deane’s Transit Group made its initial contributions in Sep. Operating margins for 3Q12 rose 2.8% YoY to $117m on account of rising profit margins which increased to 13%, on par with 3Q11. Notably, fuel and energy costs moderated 6.2% on account of favorable hedges, while materials and consumables fell 10.6% on account of lower component reconditioning and hedges of diesel for resale in Singapore. Mgt guided that it expects revenues from its SG Taxi, Bus and Rail operations to rise on account of replacement taxi’s and increased ridership; rail margins however are expected to remain under pressure from rising startup costs for the Downtown Line. Its China Bus, and UK Taxi revenues are expected to decrease on account of divestments and austerity measures. The co guides for 2012 capex to reach ~$540m excluding the bus services enhancement program. HSBC keeps at Overweight, but trims TP by 3% to $1.90, to account for reduced contributions for its Australia bus business, after the 51% owned subsidiary CDC announced last wk it failed to renew ~17% of its existing routes, effective from end ’13. Nomura keeps at Buy with TP $1.72, notes the stock currently trades at FY13/14e P/E of 13.4x and 12.7x, towards the lower end of its historical P/E band of 10-20x, while div yield is at 3.7%. Deutsche keeps at Buy with TP $1.87.