ComfortDelGro

ComfortDelGro: Key points from Tokyo NDR are 1) Moderate revenue growth at the group level. Key pressure point is staff cost, especially Singapore, where current labour shortage continues to pose a challenge. Overall, management sees 5-7% annual earnings growth for the group is achievable. 2) The impending fare increase will only stem bus ops losses in the near term. In the longer-term, a more sustainable operating model is required. Meanwhile, Downtown Line contributions are expected to accelerate over the next few years, driving overall rail profitability improvement. Note that without DTL’s startup cost this year, FY13 rail operating profit margin would have been 14-15% versus 3% reported. 3) China Taxi business should continue to expand on economic growth and urbanization. Competition in china Taxi space should be benign on regulated fares. CDG continues to hold pole position in the 10 cities it operates taxis. In Australia, strategic focus lies in the prospect to privatize the balance of 70% of the bus market. CDG I swell positioned to capture structural growth opportunities when this happens. 4) On M&A, CDG looks at expected returns and access to majority control. The latter implies suitable targets in many ASEAN markets are limited. The latter criterion implies suitable targets in many ASEAN markets are limited. CDG isn’t very optimistic on US market either, citing lack of success of other overseas operators who have ventured into the latter. In any case, funding future acquisitions shouldn’t be an issue given CDG ended FY13 in a slight net cash position