Thursday, June 27, 2013
Comfort Delgo: Deutsche adds on to the recent increasing list of brokers calling for a buy on the counter, with a Buy Call and $2.13 TP. House note that share price has fallen abt 17% over the past mth and at current price offers a decent 3.7% yield. House recent key discussions with management revealed that mgt remains optimistic on the regulatory and operational outlook in Singapore. On the regulatory front, mgt cited recent govt initiatives (e.g. redistribution of bus shelter advertising revenues and suspension of rental charges for bus depots) as indications of an improving regulatory environment. Mgt welcomes any potential move by the government to tender out bus routes on a cost-plus basis. The potential migration of the Northeast Line (NEL) to the new (capex-light) rail financing framework would also be viewed positively. The grp now targets 60% overseas contributions; Australia/China in focus. In terms of key growth markets, emphasis remains on Australia and China. Management expects impact of the loss of the two Australia bus routes (effective Sep) to be mitigated by recent acquisitions in NSW and Victoria. Over the longer term, management expressed optimism around growth prospects in Australia, supported by anticipated privatization of the bus segment.