SG: ComfortDelGro Corp (CD SP) Transport | Taxiing to Another Profitable Quarter

Target price: $ 1.94 | BUY | Upside 17.2%

Decent 2Q2012 results; Taxis lead again. ComfortDelGro (CDG) reported a NPATMI of SGD65.0m for 2Q2012, an 8.5% increase YoY. Although profits were boosted by a SGD7m increase in Automotive Engineering Services profit, the Taxi business continued to contribute most significantly to the bottom-line (34.7% of operating profit, Fig 2 & 3). An interim dividend of SG 2.9 cts was declared, 7.4% higher YoY.

Broad-based revenue growth. CDG’s 2Q2012 financial performance was notable because revenue growth was recorded across almost every business segment. Out of CDG’s core transport segments, Taxi revenue led the way with a 9% increase YoY to ~SGD280m (Fig 3).

Buses a drag, but expectations are low. Of some concern is the Singapore Bus segment, which saw a 65% YoY decrease in operating profit to SGD1.7m, kept afloat with help from advertising and rental revenue. While expectations remain low for the bus business on higher costs, a positive catalyst remains a favourable review of the public transport fare framework by early 2013.

Strength in diversity; Outlook largely positive. 41% of revenue and 45% of operating profit were contributed by CDG’s overseas businesses (Fig 4). Once again, this geographical diversity of the group’s business model allowed CDG to post decent results despite challenges faced by the local public transport operators. Management also guided towards a largely positive revenue outlook, with cost management cited as a key point of focus for the group.

CDG preferred in Land Transport sector, maintain BUY. We roll forward our 16x PER valuation to FY2013 EPS, increasing our Target Price to SGD1.94. We maintain our BUY recommendation based on CDG’s resilient earnings, complemented by its geographically diversified business, both of which support steady, growing dividend payouts. Investors buying in within this week will enjoy the interim dividend declared of SG 2.9 cts, payable on 31 Aug 2012.

Source: Maybank Kim Eng Research - 14 August 2012