• Keep BUY and SGD1.75 TP, 23% upside and c.3% yield. Singapore has scrapped amongst the last of its COVID-19 curbs, allowing non-fully vaccinated visitors to enter the country without the need to serve quarantine, and removing the need for indoor masking at most venues. This, in addition to the upcoming F1 event, we believe, should result in higher tourist inflow into Singapore. ComfortDelGro’s rail and taxi businesses should witness higher ridership and demand. We continue to remain upbeat on its earnings recovery over the upcoming quarters.

• Relaxation on international travel restrictions. Singapore announced that effective 29 Aug, it will lift rules on indoor masking at most venues and will ease quarantine requirements for non-vaccinated travellers as the country scrapped amongst the last of its pandemic-era curbs as COVID- 19 infections have dropped. Non-fully vaccinated visitors entering the country will not have to serve quarantine, but are required to test negative within two days before traveling to Singapore. We expect this move to translate into higher tourist arrivals into Singapore, which is already gearing up for the upcoming F1 event. This should translate into a) an increase in rail transport ridership, and b) higher demand for taxis in Singapore.

• Singapore rail ridership continues to improve. SBS Transit (SBUS SP, NR), the Singapore public transport subsidiary of CD, has registered MoM improvement in rail ridership has since Feb 2022. The ridership this July was c.50% higher than Jul 2021 and was c.60% higher than Jul 2020. The YTD rail ridership is only 25% below pre-pandemic levels in 2019. This improvement in rail ridership, which we expect to sustain over the next few quarters, along with the transition of the Downtown Line (DTL) to New Rail Financing Framework version 2, should help offset some reduction in its bus service fees that will come in to effect from Sep 2022.

• Strong demand for taxis creates an opportunity to revisit the rental rebate. The number of taxis in Singapore has declined by 23% since the start of the pandemic to 14,316 as at July this year. However, demand for taxi services has picked up since the COVID-19 restrictions were gradually eased in early this year. The demand and supply mismatch has led to fare surges and has improved the earnings for taxi drivers. This may offer CD an opportunity to gradually reduce the rental rebates that it is currently offering its taxi drivers till end-Sep 2022.

• Downside risks: i) Exclusion of the stock from the STI Index in the upcoming review, ii) extension of rental rebates to taxi drivers beyond Sep 2022; iii) continuing decline in its taxi fleet size; iv) lower Singapore bus revenue amidst amended contracts; iv) lower margins for key businesses; and v) the UK witnessing a sharp decline in economic growth.

Source: RHB Research - 26 Aug 2022