Comfort Delgro

Comfort Delgro: Released 3Q13 net profit of $76.7m (+5% y/y, +11% q/q) which was largely in line with estimates, as revenue came in at $978.4m (+9% y/y, +8% q/q). The result brings 9M13 earnings to $203.3m (+6%). The increase in revenue came from the Bus Business, Taxi Business, Inspection and Testing Services Business, Rail Business and the Bus Station Business offset by a decrease in revenue at the Automotive Engineering Services Business, the Driving Centre Business and the Car Rental and Leasing Business. Sales growth would have been even stronger at 10% had it not been for the negative translation effect of the weaker AUD and Sterling Pound. Operating expenses increased by 9% to $856m, as costs for Metroline West and the soon-to-be-operational Downtown Line were incurred, resulting in a 5% increase in operating profits to $122.4m. Going forward, management guides for higher revenue from its bus business in Singapore and UK, but expects lower revenue from Australia. Guide for higher sales from its rail business, while revenue from its taxi business in Singapore and China is expected to increase, while UK, Australia and Vietnam contributions are expected to be stable. Revenue from the bus station business in Guangzhou, driving centre business and car rental and leasing business is expected to be maintained, and revenue from the automotive engineering services business is guided to be lower, while revenue from the inspection and testing services business should increase. Comfort Delgro currently trades at 14.8x FY13E P/E versus SMRT’s 28x. Key segmental breakdown summary: - Bus division: Revenue for the division was at $506.1m (+14%) boosted by maiden contributions from Metroline West in the UK, as revenue from the UK bus business rose 39% to $202.3m with Metroline West contributing $54.2m. The Group’s bus business in Australia saw revenue flat at $121.3m, as actual revenue increased was eroded by an unfavourable currency translation effect. In Singapore, SBS Transit continued to come under cost pressure, with its bus operations incurring an operating loss of $0.9m. - Taxi division: Revenue for the divison was at $300.3m (+7%), with gains in Singapore and China offset by declines in Australia and UK. In Singapore and China, taxi revenue was at $227.4m (+8%) and $40.7m (+10%) respectively, due to either/or higher rentals, a larger operating fleet and an increase in the volume of cashless transactions. In the UK, taxi revenue fell 6 % to $25.5m as a result of fewer corporate and taxicard bookings, while in Australia revenue fell 12% to $5.1m, caused by negative currency translation effect. Taxi revenue in Vietnam was unchaged at $1.6m. - Rail division: Despite revenue at $37.9m (+8%), led by continued ridership growth, the rail business incurred an operating loss of $2.6m (3Q12: $0.4m), due mainly to startup costs associated with the Downtown Line as well as higher repair and maintenance costs. - Bus Station division: Revenue under Guangzhou Xin Tian Wei increased by 13% to $8.1m from an increase in passengers using the station. - Inspection and Testing Services division: Revenue grew by 6% to $27.0m due to higher business volumes.