May 17, 2017

ComfortDelGro’s (CDG) 1Q17 results came in largely within expectations despite a 2.4% YoY decline in revenue to S$972.0m,mainly eroded by weaker GBP against SGD. Underlying revenue was actually flat, driven by public transport services (bus and rail) but offset by taxi and automotive engineering businesses due to a fall in Singapore taxi fleet size and the corresponding lower volume of diesel sold to taxi drivers.

1Q17 operating expenses fell 1.7% YoY to S$871.5m, mainly due to positive FX effect, otherwise increasing 1.0%, driven by higher depreciation and staff costs.

CDG also received ~S$11.1m in special dividends given its 9.6% stake in Cabcharge Australia. Excluding this one-off special dividend, 1Q17 core PATMI came in flat at S$72.7m, and formed 22.1% of our FY17 forecast. Note that 1Q has historically been CDG’s weakest quarter.

Looking to FY17, CDG experts expect private hire car services to continue to impact taxi business, resulting in shrinking taxi fleet size, translating to lower taxi rental revenue. CDG’s taxi fleet idle rate also increased from an average of 1.4% in FY16 to 3.0%-3.5% in 1Q17, despite revenue sharing schemes to help lower fixed rental costs for hirers, though CDG’s fleet idle rate remains well below industry average.

On a positive note, we expect rail to be the main revenue growth driver ahead with the opening of DTL3 in 2H17, serving the most populated areas compared to the first two phases We forecast for breakeven from FY19.

 

On aforementioned reasons, we cut our FY17/18F PATMI by 3%/6% and lower our FV from S$2.95 to S$2.88. Maintain BUY. –OCBC

 

ComfortDelGro closed at: S$2.460