ComfortDelgro

ComfortDelgro: Nomura lifts its target price to $1.86 from $1.72, highlighting the new Downtown Line to achieve profitability sooner than expected from faster ridership ramp-up as the DTL passes through more densely populated areas, higher rental income from DTL’s retail space (4x more than current NEL) and strong cashflow with more capex costs borne by LTA. House also expects govt subsidies to offset losses in Spore bus operations and stricter Spore taxi regulations to reduce competition. It also sees further earnings upside from accretive acquisitions as CD’s overseas ventures have yielded respectable returns. Backed by its strong balance sheet and zero gearing, dividends are expected to remain stable with potential for capital management. The stock trades at 12.6x/11.5x FY13/14 P/E and ~1.5x P/B, which is at the low-mid end of its 39-year trading band of between 11-15x). At current levels, it offers a FY12 dividend yield of 4%.