Comfort

Comfort: Commendable 2Q13 showing, in line with expectations. Net profit was up 6% yoy to $69m, on the back of a 3% rise in revenue to $908m, driven by broad based growth across its various segments. Segments that performed well include UK buses (lower fuel and other costs) and Singapore taxi (larger fleet and lower fuel). Its overseas businesses did well despite facing currency headwinds, particularly for its UK buses and the Australia bus & taxi businesses. Group EBIT margin improved sequentially to 12.4% in 2Q13 (vs 11.0% in 1Q13). Rail was the only segment whose EBIT margin declined by 3.1% pts qoq to 4.5% due to costs related to Downtown Line. Net cash inflow enhanced the balance sheet. CIMB likes Comfort’s positive cash flow generating abilities and the current predictable capex trend. At only 2% net gearing ratio, there is room to gear up the balance sheet for opportunities. Noteably the group announced an interim div of 3ct, up from 2.9ct last yr. Eyes are now on Australia where Comfort has submitted the bid for the latest tender of bus service in Australia 9region 4) and is waiting for the results, expected to be out late Aug or early Sep ’13. Given the group’s established track record, mgt is hopeful of a favorable outcome. CIMB upgrades to Outperform from neutral, lifts TP to $2.18 (from $1.94). UOBK maintains Buy with TP $2.35 (from $2.32), keeps SMRT as its pick in the land transport sector due to its better profile, balanced mix of div income and growth. Nomura maintains Buy with TP $2.19. Deutsche maintains Buy with TP $2.13