Comfort Delgo

SG Land transport: SCB highlighting that representatives from LTA, Ministry of Transport and Public Transport Council have been in London studying London’s public bus contracting and tendering process, in preparation for the impending restructuring of Singapore’s public bus industry to a government contracting model, where the house believes that Singapore will closely replicate London’s model. As such, Comfort Delgor’s familiarity with the incentive/penalty structures in such contracts, as well as its strong track record of securing them, should give it a strong competitive advantage for increasing margins via performance payments and retaining or expanding market share. Conversations with operations managers at rival bus operators in London suggest Singapore could struggle to attract international operators to compete for bus tenders without allowing higher margins. The house is raising its TP for CD to $3.00, believing that their initial forecasts was too conservative, and they are also forecasting a special dividend of at least $0.40 or a 16.5% yield in 2016.