Thursday, May 14, 2015

ComfortDelgro

ComfortDelgro: 1Q15 net profit made up 22% of consensus FY15 estimates, and can be considered relatively in line given 1Q is seasonally weaker.

Revenue increased 6.8% to $67.6m, while revenue inched up 1.3% to $963.5m, with growth in most segments, particularly from Taxi, Bus and Rail. Group operating margin unchanged at 10.7%

Main segmental highlights:

Taxi: Star of the quarter. Revenue rose 5.2% to $321.8, while operating profit jumped 12.3% to $36.6m. This was from higher rental from taxi replacement and a larger operating fleet. Operating margin expanded 0.7ppt to 11.4%.

Bus: Revenue grew 2.3% to $477.3m, while operating profit fell 7.6%. Top line increase was driven by higher average fares and ridership in Singapore, eroded by weak A$ and £. UK bus business was also affected by two-days of industry-wide strike, and one day less of revenue. In Australia, revenue increase from the acquisition of Blue Mountains was completely offset by weaker A$. Operating margin narrowed 0.8ppt to 7.4%.

Rail: Revenue grew 8.1% higher at $51m, from higher average fares and ridership, and rental from new DTL1 shops. NEL/ DTL/ LRT ridership were 526k/ 65k/ 95k, or an increase of 5.2%/24.1%/13.3%. Operating profit grew 63.6% to $3.6m, while operating margin expanded 2.4ppt to 7.1% from higher fares.

On outlook, Singapore bus and rail revenue should increase from the 2.8% fare hike effective mid-Apr, while taxi growth should come from increased cashless transactions.

New routes and contract price adjustments for the UK bus business should buoy growth, while the Australian bus contributions should remain steady.

A net cash position of $152.5m should be handy for M&A. Despite opportunities aplenty, management remain committed to a good price. A sizeable yet attractively valued acquisition could alter ROE outlook, a positive catalyst.

For now, Maybank-KE opines positives are priced in, and maintains Hold on the stock, with TP of $2.90

ComfortDelgro is currently trading at 20.8x FY15e consensus P/E.

Latest broker ratings:
Maybank-KE maintains Hold with TP of $2.90
CIMB maintains Add with TP of $3.42
UBS maintains Buy with TP of $3.54

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