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Author:   |   Latest post: Fri, 13 Oct 2017, 09:19 PM

 

Comfortdelgro - Q2 FY17 Results & Thoughts

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I was quite anticipating the results from Comfortdelgro and even more so after reading the results in the previous week by Vicom and SBS where both increased their payout to issue higher dividends to shareholders.

I mentioned previously that I thought there was a good decent chance that Comfortdelgro might maintain their dividend as last year despite the poorer taxi division due to the better cashflow that they have. This remains something which I am taking a close look still.






In terms of earnings for the Q2, revenue was down 3% while nopat was down 9% year on year.

Revenue for the taxi division was down by more than 10% due to the lower leasing fleet and higher competition. You can see that in the overhead driver's benefits also quickly went down so margins are steady but it was still a very strong decline.

The public transport did much to mitigate the situation otherwise it could have been worse.

In terms of geographical, the UK segment was the part intriguing to me. Not sure if their bus division there are facing some pressures.

Despite the lower earnings, operating cash flow was higher due to the lower grant, as well as higher free cash flow due to the lower capex. The free cash flow yield I computed is at 17 cents or 7.3% based on current share price. They would be well able to pay the current payout they are paying to shareholders in term of dividend.

Other than that, there are not much new development that we will know about the taxi business and how the management would tackle the current situation.

I think overall there would probably a point where the drop in taxi would reach saturated point, and the disruptors would face more pressures in terms of less incentives so that would be a time where competition is really head to head. I mean think about this, if there are a disruptor in airline and they keep giving huge incentives for you to take their flights you probably do that too. The question remains when will that last. Their technology and light asset model are obviously a huge advantage too.

I'm still skeptical as well about the margins on the new downtownline later this year as well as the public fare reduction. Sentiments should continue to remain poor.

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