ComfortDelgro

ComfortDelgro: 4Q14 net profit grew 6.3% to $63.7m, bringing full year net profit to $283.5m (+7.7%), in line with consensus estimates.
Revenue grew 8.1% to $4.1b with increases from all segments, with an added booster from positive FX translation.

Bus business expanded 10.4% to $2.1b. Singapore bus ops grew 10.5% to $777.4m on higher average ridership, fares and increased other operating income. UK/Ireland bus business (+$201m, 29.3%) benefitted from full year contribution of Metroline West and the stronger £. This was offset by Australian ops ($68.6m, -14.8%) on decrease in services and weaker A$.

Taxi business grew 7.2% to $1.3b. Singapore contributions ($68.8m, +7.7%) grew from higher rentals, larger fleet and increased cashless transactions. All other overseas taxi businesses grew, with the exception of Australia.

Rail business revenue grew 19.5% to $196.8m from higher ridership and average fares from DTL 1.
Operating expenses grew in tandem with top line.

On Singapore bus reforms, management remains tight lipped on any potential sale of its bus assets. Should the sale happen, Comfort stands to gain as 1) expansion in operating margins would boost bottom line, and 2) assuming a $800m cash inflow from the sale of bus assets, Comfort might likely deleverage its balance sheet, and increase its DPS payout.

Cheaper fuel prices may also be a tailwind for Comfort this coming year.

Nevertheless, some brokers have downgraded their call on Comfort on valuation grounds.

Final DPS of 4.5¢ announced, bringing full year DPS to 8.25¢ (FY13: 7¢)

Comfort is currently trading at 21.8x FY15e P/E, 1 S.D. above its 10 year P/E average of 18x. Nevertheless, it still compares favorably to SMRT (28x forward P/E), which also happens to be more risky its higher exposure towards the uncertainty clouding the Singapore rail reforms.

Latest broker ratings:

CIMB maintains Add with TP of $3.42
UOB KayHian downgrades to Hold from Buy with TP increased to $3.31 from $3.08
OCBC downgrades to Hold from Buy with TP increased to $3.07 from $3.03
Maybank KE maintains Hold with TP increased to $2.90 from $2.50
Credit Suisse maintains Neutral with TP increased to $2.90 from $2.50