• FY13 PATMI grows 5.7%
• S$0.04 final DPS declared
• Overseas operations the main driver

FY13 results within our expectations

ComfortDelGro’s (CDG) FY13 results met our expectations, with both revenue and PATMI growing by 5.7% to S$3,747.7m and S$263.2m, or 0.2% and 0.8% higher than our forecasts, respectively. This was a new record high for the group. Its results would have been even better if not for a negative FX translation drag of S$5.8m on its operating profits. CDG also declared a final DPS of S$0.04, bringing total FY13 dividends to S$0.07/share (FY12: S$0.064/share), which translates into a yield of 3.6% and payout ratio of 56.5%. This exceeded our S$0.062/share estimate. CDG’s declared DPS has grown at a five-year CAGR of 7.0% from FY08-13, as compared to its 5.3% EPS CAGR during the same period. This has been buttressed by its solid financial position and strong operating cashflow generation ability.

Domestic weakness offset by growth in overseas operations

CDG managed to register positive growth in operating profits for all its core segments, with the exception of its Rail Business, which turned in an operating loss of S$5.8m (excluding advertising and rental revenue). This was attributed largely to start-up costs from the Downtown Line (DTL) amounting to S$20.7m. CDG’s overseas operations contributed 40.5% of its total revenue, but 48.9% of overall operating profits. We believe this highlights the struggles faced by its Singapore operations. We expect continued start-up losses from its DTL operations in FY14 which would cause a drag on its overall Rail Business. However, this would be mitigated by narrowing losses for its bus operations due to the upward fare adjustment (effective 6 Apr this year) and continued traction in its taxi operations, coupled with continued growth for its overseas operations. In particular, we are positive on the full year contribution in FY14 from its Metroline West acquisition in the UK.

Maintain BUY

We rework our assumptions following a change in analyst coverage, and bump up our DDM-derived fair value estimate on CDG from S$2.20 to S$2.30. We are positive on the fact that management has been able to mitigate domestic challenges by making astute accretive overseas acquisitions. Maintain BUY.

Source: OCBC Research - 14 Feb 2014