ComfortDelgro: Results were in line with expectations. Net profit rose 1.6% yoyY and 7% qoq, powered by the Aust bus operations (+34%), the China driving centres (+15.5%) and Spore rail (+15%), taxi (+9%) and bus (+4%). Operating margin improved despite weaker AUD & higher energy costs. Interim DPS was higher at 2.7¢.
We expect 2H10 earnings to be stronger due to continued ridership growth momentum in bus/rail and overseas contribution. Mgmt remains positive on rail in SG, bus operations in Aust/SG & sees improvement in taxi business in SG from increased tourism & the IRs. CD has hedged about 25% of its bus fuel requirements for 3Q10 at slightly below US$70/bbl.
We view CD as a defensive low beta play. Potential catalysts include recovery in the UK economy & possible overseas M&As esp in Aust and China. Stock trades at 14x FY10 P/E offering 3.6% yield. KE has $1.87 TP for the stock, DB has $1.72.
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