Comfort Delgro

Comfort Delgro: OCBC note that ComfortDelgro was re-awarded the region 4 contract by the New South Wales transport ministry on Thur, and this should remove any negative overhang for the group’s future in one of its key markets of Australia. However, its share price has failed to react to the news and remains weak, which is unwarranted in house view. Although investors may have concerns over rising fuel prices and the potential for rate hikes, CDG is unaffected given its substantial hedge (80%) on fuel requirements for the rest of the year and low gearing position. Therefore, feel that this recent share weakness creates an attractive opportunity for investors to allocate into this fundamentally healthy company with earnings stability. Overall, house upgrade CDG to BUY with an unchanged fair value estimate of $1.95.