Comfort Delgro

Comfort Delgro: 1Q13 results in line; fairly good underlying operational performance. Net profit rose 8% YoY to $58m, as EBITDA margin improved YoY for the first time in 1.5 yrs, largely driven by lower energy costs and a good outcome in view of rampup costs for the Downtown Line.. Revenue growth, at 2% YoY reached $871m; not particularly strong, but this was impacted by FX and an asset divestment in China. Revenue growth was primarily supported by firm gains in Singapore bus (+7% YoY on higher ridership and implied average fares) and Singapore taxi (+8% YoY on higher rentals, larger fleet and higher cashless transactions). Australia bus revenues were up 4% YoY, reflecting the consolidation of Deanes Bus Lines (acquired in Sep), offset by FX. Revenues from the UK were lower YoY, due to FX, timing of billing cycles (which impacted UK bus revenues) and lower taxi bookings. Revenues from China taxi continued to grow (+3% YoY), but this was offset by a drop in China bus revenues on the divestment of Shenyang ComfortDelgro Bus. Reflecting Comfort’s financial discipline, 1Q13 opex grew just 1% YoY. While staff costs rose 5% YoY, notably, materials and consumables fell 13% YoY while energy costs dropped 9% YoY. CD now has c.70% of 2013’s Singapore energy requirements hedged at “attractive prices” – a positive indication for margins going forward. Mgt cites a continued focus on M&A (currently reviewing two possible acquisitions). Deutsche keeps at Buy with TP $2.13. UOBK upgrades to Buy, raises TP from $1.92 to $2.32. Comfort shares have been trending to new highs, likely as investors favor Comfort’s geographically diversified exposure in international markets, vs peer SMRT’s risk concentration in Singapore rail.