ComfortDelgro

ComfortDelgro: A month following its London bus acquisition, the group announced that it will acquire Driver Group Pty Ltd’s Melbourne bus fleet and five metropolitan routes for A$22m (S$26.8m). The acquisition will increase its fleet in Victoria from 378 to 420 buses, and is expected to be completed in Jul 2013. The acquisition was in-line to the group’s own valuations of 5.8x historical EV/EBITDA, as well as previous purchases in Australia. According to Nomura, the assets acquired produced historical revenue of A$12m and EBITDA of A$3.8m. This will have minimal impact to ComfortDelgro’s bottom line, given that the effective contribution will make up approximately 0.5% of FY14 earnings (additional $1-1.3m). Stock reaction likely to be neutral; On the overall land transport sector in Singapore, houses are more favourable towards ComfortDelgro over SMRT, given the former’s overseas exposure (48.9% of operating profit), as well as its attractive valuations. ComfortDelgro trades at 17.3x historical P/E, as compared to SMRT’s 26.3x.