What is the news?

CDG reported a strong set of results with net profit of S$72.8mn (+5.4%y-y). Higher costs incurred in preparation for the launch of DTL continued to impact the profitability of its rail operations. Singapore’s Bus operations suffered its 6th consecutive quarter of operating losses in the quarter largely due to cost pressures from rising staff related expenses. While its rail and bus businesses in Singapore continued to suffer from the lack of fare increase, its Taxi business reported one of its strongest quarterly performances in recent history due to a larger operating fleet.

How do we view this?

We are positive on the results as it was achieved under considerable cost pressures facing its fare based business in Singapore. Due to the grants given to the company, additional services rolled out under BSEP is neutral to the financials of CDG. Overall, the company’s performance beat our estimates for the quarter.

Investment Actions?

We tweaked out FY12E estimates upwards to account for the better than expected performance in the quarter. We lift our TP to S$1.80 and maintain our Buy rating on the stock.

Source: PhilllipCapital Research - 14 Nov 2012